The document discusses capital structure, asset structure, financial structure, and optimal capital structure. It defines capital structure as the permanent financing of a firm through long-term debt, preferred stock, and net worth. Financial structure includes current liabilities in addition to capital structure. Optimal capital structure is the combination of debt and equity that achieves goals like maximizing returns in the most effective way. Determinants of capital structure include the nature of business, stability of earnings, growth rate, and costs of capital.
2. Capital structure is the permanent financing of the firm
represented by long term debt, preferred stock and net worth.
By Weston and Brigham
CAPITAL STRUCTURE
3. Gross capital employed
The total investment in the enterprise
Asset structure = fixed assets + current
asset
ASSET STRUCTURE
4. Financial structure =capital structure +
current liabilities
Capital structure = long term capital
Financial structure = the total finance
mix of the firm
FINANCIAL STRUCTURE
8. •Nature of business
•Stability of earning
•Initial requirement
•Rapidity of growth
•Investors
•Leverage of trading on
equity
•Rate of return
•Voting control
•Trend
•Cost of capital
•Prevailing status
•Asset structure
•Management attitude
•Lender’s attitude
•Fiscal and tax
•Advice
Capital
structure
determinants
9. CAPITAL GEAR RATIO/CAPITAL GEARING
The proportion of the equity share
capital to the total of the firm is
commonly known as ‘capital gearing
ratio’
The relation of ordinary shares to the
preference share capital and loan capital
is described as capital gearing
High and low gearing
