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प्रश्न
What is meant by Capital Structure?
Define 'Capital Structure'
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
What is meant by Trading on Equity?
How does cost of equity affect the choice of capital structure of a company? Explain
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:
Risk Consideration
Explain any four factors that affect the choice of capital structure of a company.
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.
Owned Capital Borrowed Capital
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.
Answer the following question.
'Determining the relative proportion of various types of funds depends upon various factors.' Explain any six such factors.
Read the following text and answer the following questions on the basis of the same:
Mr. A. Bose is running a successful business. Mr. Bose is the owner of R. K. Cement Ltd. Mr. Bose decided to expand his business by acquiring a Steel Factory. This required an investment of Rs. 60 crores. To seek advice in this matter, he called his financial advisor Mr. T. Ghosh who advised him about the judicious mix of equity (40%) and Debt (60%). Employ more of cheaper debt may enhance the EPS. Mr. Ghosh also suggested him to take loan from a financial institution as the cost of raising funds from financial institutions is low. Though this will increase the financial risk but will also raise the return to equity shareholders. He also apprised him that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on loan is a tax deductible expense for computation of tax liability. After due deliberations with Mr. Ghosh, Mr. Bose decided to raise funds from a financial institution.
Identify the concept of Financial Management as advised by Mr. Ghosh in the above situation.
Financial leverage is called favourable if :
______ refers to a situation when a company is not able to meet its fixed financial charges.
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.
State any three factors determining the choice of an appropriate capital structure of a company.
______ refers to the increase in profit earned by the equity shareholders due to the presence of fixed financial charges like interest.
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 ______.
