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Explain the Following as Factors Affecting the Choice of Capital Structure: Return on Investment - Business Studies

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ConceptConcept of Capital Structure

Question

Explain the following as factors affecting the choice of capital structure:

Return on Investment

Solution

Factors affecting the choice of capital structure:

Return on Investment: Debt offers the higher return in the sense that in case of debt, the difference between cost and return is greater. Accordingly, the earning per share is greater.
Higher ROI ⇒ More debt
Lower ROI ⇒ Lower debt

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Solution Explain the Following as Factors Affecting the Choice of Capital Structure: Return on Investment Concept: Concept of Capital Structure.
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