After reading this article you will learn about Capital Structure:- 1. Forms of Capital Structure 2. Importance of Capital Structure 3. Planning. Forms of Capital Structure: The capital structure of a new company may consist of any of the following forms: (a) Equity Shares only (b) Equity and Preferences Shares (c) Equity Shares and Debentures (d) Equity Shares, Preferences Shares [...]
After reading this article you will learn about the Calculation of Point of Indifference and Uncommitted Earnings per Share. Point of indifference refers to that EBIT level at which earnings per share (EPS) remains the same irrespective of different alternatives of debt-equity mix. While calculating the equivalency point, the provision for repayment of debt or obligation towards sinking fund has [...]
This article throws light upon the two main types of risks involved in capital structure decision of a firm. The types are: 1. Financial Risk 2. Non-Employment of Debt Capital (NEDC) Risk Capital Structure Decision: Type # 1. Financial Risk: The financial risk arises on account of the use of debt or fixed interest bearing securities in its capital. A [...]