Advertisements
Advertisements
प्रश्न
Explain the following as factor affecting the choice of capital structure:
Cash flow position
Advertisements
उत्तर
Capital structure is the proportion of debt and equity used for financing business operations.
Cash flow position: The cash flow position should match with the obligation of making payments because if the company fails to make payment will face insolvency. So, a company employs more debt securities in its capital structure if a company is sure of generating enough cash inflow. On the other hand, if there is less cash, then a company should employ more of equity in its capital structure.
Strong cash flow position ⇒ More debt
Weak cash flow position ⇒ More equity
shaalaa.com
या प्रश्नात किंवा उत्तरात काही त्रुटी आहे का?
