PRESENTATION ON:-CAPITAL STRUCTURE AND

FACTOR INFLUENCING CAPITAL STRUCTURE

TABLE OF CONTENT
Introduction to Capital Structure
Meaning of Capital Structure
Definition of Capital Structure
Fundamental pattern of capital structure
Features of an capital structure
Factors influencing capital structure


INTRODUCTION
In order to run and manage a
company , fund are needed, right
from the promotional stage up to
the end ,financial plays an important
role in a companys life
MEANING OF CAPITAL STRUCTURE
Capital structure refers to the mix of sources
from where the long-term funds required in a
business may be raised. In other words, it
refers to the proportion of debt, preference
capital and equity capital.
DEFINITION
According to R.H.Wassel , The term
capital structure is frequently used to
indicate the long term sources of funds
employed in a business enterprise.
In the view of I.M.Panday , Capital
structure includes long-term debts,
preference share, capital reserves and
surplus.
FUNDAMENTAL PATTERN OF CAPITAL
STRUCTURE
1. Equity capital only( including reserves &
surplus).
2. Equity and preference capital.
3. Equity, preference and long-term debt.
4. Equity and long term debt.

FEATURES OF AN CAPITAL STRUCTURE
1. Profitability:- It should minimize the cost of
financing and maximize earning per equity
share .
2. Flexibility:- The capital structure should be
such that company can raise funds whenever
needed.
3. Conservation:- The debt content should not
exceed the maximum which the company
can bear.

CONT.
4. Solvency:- The capital structure should be
such that the firm does not run the risk of
becoming insolvent.
5. Control:- There should be minimum risk of
loss or dilution of control of the company.
FACTORS INFLUENCING CAPITAL STRUCTURE
1.Financial Leverage Trading on
equity:-The use of long-term fixed
interest bearing debt and
preference share capital along with
equity share capital is called
financial leverage or trading on
equity.
2.COST OF CAPITAL:-
It is the minimum rate of return,
which a business can expect to
earn on its investments. The
minimum rate of return is that which
ensures that the market value of the
company does not fall.

3. NATURE OF ENTERPRISE:-
The nature of enterprise also to a
great extent affects the capital
structure of the company.


4. LEGAL REQUIREMENTS:-
The promoters of the company
have also to keep in view the legal
requirements while deciding about
the capital structure of the company.
5. PURPOSE OF FINANCING:-
The purpose of financing also to
extent affects the capital
structure of a company. In case
funds required for some directly
productive purpose.
6. PERIOD OF FINANCE:-
The period for which finance is
required also affects the
determination of capital structure
of companies.