After reading this article you will learn about Capital Gearing:- 1. Meaning of Capital Gearing 2. Significance of Capital Gearing 3. Trade Cycles. Meaning of Capital Gearing: The term 'capital gearing' refers to the relationship between equity capital (equity shares plus reserves) and long-term debt. It may be planned or historical, the latter describing a state of affairs where the [...]
This article throws light upon the top four theories of capital structure. The theories are: 1. Net Income Approach 2. Net Operating Income Approach 3. Traditional Approach 4. Modigliani and Miller Approach. Theory # 1. Net Income Approach: According to this approach, a firm can minimise the weighted average cost of capital and increase the value of the firm as [...]
The terms, capitalization, capital structure and financial structure, do not mean the same. While capitalisation is a quantitative aspect of the financial planning of an enterprise, capital structure is concerned with the qualitative aspect. Capitalisation refers to the total amount of securities issued by a company while capital structure refers to the kinds of securities and the proportionate amounts that [...]