capital structure management
Chapter - 1
Introduction
1.1 Introduction
Capital structure concept holds a major place in a financial management. Capital structure refers the proportion of debt and equity capital .A perfect balance between debt and equity is required to ensure tradeoff between risk and return. Thus, optimal capital structure means the capital structure having reasonable of proportion of debt and equity. An optimal financial structure makes better use of society’s fund of capital resource ,and thus it increase the total wealth of society also by increasing the firm’s opportunity to engage in future wealth creating investment, it increase the economy of investment and growth. Capital structure is the combination of debt and equity securities that comprise a firm’s financing of its assets. Both debt and equity securities are used in most large corporations. The choice of the amount of debt and equity is made after a comparison of certain characteristics of each kind of securities of internal factor related to the firm’s operations and of external factor that can affect to the firm. The capital structure is made up of debt and equity securities, which comprise a form’s finance of its assets. It is the permanent source of financing represent by long –term debt and, plus preferred stock, plus net worth. The determination of degree of liquidity of a firm is not the simple task. In the long term liquidity may depend on the profitability of a firm but weather it service to achieve long run profitability depend to some extend on its capital structure. This term includes only long term debt and total stockholders’ investment. It may be defined as one including short term and long term fund. Capital structure refers to the combination of long term source of funds such as debentures, long term debt, preference share capitals and equity share capital including reserves and surpluses (retained earnings). Capital structure represents the relationship among different kind of long term
Introduction
1.1 Introduction
Capital structure concept holds a major place in a financial management. Capital structure refers the proportion of debt and equity capital .A perfect balance between debt and equity is required to ensure tradeoff between risk and return. Thus, optimal capital structure means the capital structure having reasonable of proportion of debt and equity. An optimal financial structure makes better use of society’s fund of capital resource ,and thus it increase the total wealth of society also by increasing the firm’s opportunity to engage in future wealth creating investment, it increase the economy of investment and growth. Capital structure is the combination of debt and equity securities that comprise a firm’s financing of its assets. Both debt and equity securities are used in most large corporations. The choice of the amount of debt and equity is made after a comparison of certain characteristics of each kind of securities of internal factor related to the firm’s operations and of external factor that can affect to the firm. The capital structure is made up of debt and equity securities, which comprise a form’s finance of its assets. It is the permanent source of financing represent by long –term debt and, plus preferred stock, plus net worth. The determination of degree of liquidity of a firm is not the simple task. In the long term liquidity may depend on the profitability of a firm but weather it service to achieve long run profitability depend to some extend on its capital structure. This term includes only long term debt and total stockholders’ investment. It may be defined as one including short term and long term fund. Capital structure refers to the combination of long term source of funds such as debentures, long term debt, preference share capitals and equity share capital including reserves and surpluses (retained earnings). Capital structure represents the relationship among different kind of long term