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प्रश्न
Explain the following as factors affecting the choice of capital structure:
Cost of equity
उत्तर
Cost of equity: In terms of dividend payments, higher the cost of equity, lower is its proportion in total capital.
Use of debt increases ⇒ Financial risk increases ⇒ Expectation of rate of return increases ⇒ Difficult to opt for ⇒ Equity cost increases
संबंधित प्रश्न
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 factor affecting the choice of capital structure:
Cash flow position
Explain the following as factor affecting the choice of capital structure:
Floatation costs
Explain any four factors that affect the choice of capital structure of a company.
Write the external factors influencing capital structure.
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.
What is meant by capital structure?
Explain the term ‘Trading on Equity’? Why, when and how it can be used by company.
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.
______ refers to a situation when a company is not able to meet its fixed financial charges.
ICR = ______
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.
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.
Which of the following is not a factor affecting capital structure of a company?
