Financial Structure of Bsrm Steels Limited
Chapter 1 Introduction
1.1 Prelude
Financial structure refers to the make-up of the right hand side of a company`s balance sheet, which includes all the ways it`s assets are financed, such as trade accounts payable and short-term borrowings as well as long-term debt and ownership equity. Each business will have a different mixture depending on its needs and expenses. This specific mixture of debt and equity that a company uses to finance all it`s operations directly affects the risk and value of the business. Capital structure, as distinguished from this structure, doesn`t include current liabilities. Financial structure is the combination of Capital Structure and Current Liabilities. Theoretically speaking, capital structure determination is achieving an appropriate and desirable combination of equity and debts in a way that could maximize the firm value and in contrast, reduced the cost of financing .There are several factors that may have effect on this relationship. On the other hand, several factors (economic and accounting) may influence the composition and structure of the capital
1.2 Review of literature
Capital structure consists of debt and equity of . This includes long-term debt, preferred stock and common stock (Dastgir, 2003). While determining capital structure, the firm has to focus on deciding about an appropriate and desirable portion of liabilities and equity because of their direct effect on value of stock market. After determining the amount of capital needed by company, management decides which source of funding and what mode should be used. Typically, companies and finance managers consider financial policies to reach the highest market value for their stocks. Maximizing shareholder wealth requires using financial resources and obtaining optimal maximum efficiency and selecting appropriate risk for the company (Kohher, 2007).
According to traditional theory, achieving an optimal capital structure is depending on the cost
1.1 Prelude
Financial structure refers to the make-up of the right hand side of a company`s balance sheet, which includes all the ways it`s assets are financed, such as trade accounts payable and short-term borrowings as well as long-term debt and ownership equity. Each business will have a different mixture depending on its needs and expenses. This specific mixture of debt and equity that a company uses to finance all it`s operations directly affects the risk and value of the business. Capital structure, as distinguished from this structure, doesn`t include current liabilities. Financial structure is the combination of Capital Structure and Current Liabilities. Theoretically speaking, capital structure determination is achieving an appropriate and desirable combination of equity and debts in a way that could maximize the firm value and in contrast, reduced the cost of financing .There are several factors that may have effect on this relationship. On the other hand, several factors (economic and accounting) may influence the composition and structure of the capital
1.2 Review of literature
Capital structure consists of debt and equity of . This includes long-term debt, preferred stock and common stock (Dastgir, 2003). While determining capital structure, the firm has to focus on deciding about an appropriate and desirable portion of liabilities and equity because of their direct effect on value of stock market. After determining the amount of capital needed by company, management decides which source of funding and what mode should be used. Typically, companies and finance managers consider financial policies to reach the highest market value for their stocks. Maximizing shareholder wealth requires using financial resources and obtaining optimal maximum efficiency and selecting appropriate risk for the company (Kohher, 2007).
According to traditional theory, achieving an optimal capital structure is depending on the cost
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