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प्रश्न
What is meant by Capital Structure?
Define 'Capital Structure'
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उत्तर १
Capital structure refers to the ratio of debt and equity in the total capital of a company.
Algebraically,
Capital Structure = `"Debt"/"equity" or "Debt"/"Debt+equity"`
उत्तर २
Capital structure refers to the proportion of debt and equity used for financing business operations. It affects the profitability and financial risk of the business, and hence, companies generally use the concept of financial leverage to set up the capital structure
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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.
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 how 'cost of debt' affects the choice of capital structure of a company
How does cost of equity affect the choice of capital structure of a company? Explain
Explain the following as factor affecting the choice of capital structure:
Cash flow position
Explain the following as factors affecting the choice of capital structure:
Cost of equity
Explain the following as factor affecting the choice of capital structure:
Floatation costs
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:
Flexibility
Explain the following as factors affecting the choice of capital structure:
Risk Consideration
“Capital structure decision is essentially optimisation of risk-return relationship.” Comment.
Answer the following question.
'Determining the relative proportion of various types of funds depends upon various factors.' Explain any six such factors.
Financial leverage is called favourable if :
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.
State any three factors determining the choice of an appropriate capital structure of a company.
Which of the following is not a factor affecting capital structure of a company?
