Advertisements
Advertisements
प्रश्न
Explain the following as factors affecting the choice of capital structure:
Flexibility
Advertisements
उत्तर
Flexibility: A firm’s capacity to borrow in the future is restricted because of excess debt. Therefore, a certain amount of borrowing is extended to meet unexpected situations to maintain flexibility.
More use of debt in present ⇒ Ability to use in future decreases
Balance should be maintained between debt and equity in the capital structure.
APPEARS IN
संबंधित प्रश्न
Viyo Ltd.' is a company manufacturing textiles. It has a share capital of Rs 60 lakhs. The earnings per share in the previous year was Rs 0.50. For diversification, the company requires additional capital of Rs 40 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year the company earned profit of Rs 8 lakhs on capital employed. It paid tax @ 40%.
a. State whether the shareholders gained or lost, in respect of earning per share on diversification. Show you calculations clearly.
b. Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.
Explain briefly any four factors which affect the choice of capital structure of a company.
Veronica Ltd., a reputed truck manufacturing company, needs rupees twenty crores as additional capital to expand its business. Mr Alind Jindal, the CEO of the company, wants to raise funds through equity. The Finance Manager, Mr Nikhil Sachdeva, suggests that the existing shareholders be offered the privilege to subscribe to the new issue of shares as per the terms and conditions of the company which was agreed by Mr Alind Jindal.
Name the method through which the company decided to raise additional capital.
Explain the following as factors affecting the choice of capital structure:
Cost of equity
Explain the following as factors affecting the choice of capital structure:
Return on Investment
Explain the following as factors affecting the choice of capital structure:
Risk Consideration
Write notes on Capital structure and its components.
State, with reasons, whether the following statements are True or False (Any THREE) :
It is not possible to go ahead without financial plan.
Write the internal factors influencing Capital Structure.
Answer the following question.
'Determining the overall cost of capital and the financial risk of the enterprise depends upon various factors.' Explain any six such factors.
Financial leverage is called favourable if :
______ refers to a situation when a company is not able to meet its fixed financial charges.
ICR = ______
Assertion (1): Higher the flotation cost, less attractive the source.
Reason (R): The choice between the payment of dividend and retaining the earnings is, to some extent, affected by the difference in the tax treatment of dividends and capital gains.
State any four factors affecting the decision that determines the overall capital and the financial risk of the enterprise.
When the proportion of debt and equity is such that it results in an increase in the value of equity share the ______ is/are said to be optimal.
The Board of directors of Medex Pharma Ltd. decided to issue debentures worth ₹ 40 lakhs in order to finance a major Research and Development project. This would increase the Debt Equity ratio from 1:1 to 2:1.However, at the same time it would increase the Earnings per share.
The reason that will justify the above situation is ______.
