Advertisements
Advertisements
Question
How do ‘Floatation costs’ affect the choice of capital structure of a company? State
Advertisements
Solution
Floatation cost refers to the cost of raising funds. Higher the flotation cost of a particular source, lower is its preference in the capital structure and vice versa.
APPEARS IN
RELATED QUESTIONS
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:
Stock-Market conditions
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
State, with reasons, whether the following statements are True or False (Any THREE) :
It is not possible to go ahead without financial plan.
What is meant by capital structure?
“Capital structure decision is essentially optimisation of risk-return relationship.” Comment.
Explain the term ‘Trading on Equity’? Why, when and how it can be used by company.
Write the internal factors influencing Capital Structure.
Owned Capital Borrowed Capital
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 :
______ refers to a situation when a company is not able to meet its fixed financial charges.
Which component of capital structure determines the overall financial risk?
Tapan, after leaving his job, wanted to start a Private Limited Company with his son. His son was keen that the company may start manufacturing of Mobile-phones with some unique features. However, Tapan felt that the mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be required regularly in this business. Therefore, he convinced his son to start a furniture business. ______ factor affecting fixed capital requirements is making Tapan choose furniture business over mobile phone.
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.
Which of the following is not a factor affecting capital structure of a company?
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 ______.
