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 [...]
This article throws light upon the ten main reasons necessitating change in capitalisation. The reasons are: 1. To Restore Balance in the Financial Plan 2. To Simplify the Capital Structure 3. To Suit Investor's Needs 4. To fund Current Liabilities 5. To Write off the Deficit 6. To Capitalize Retained Earnings 7. To Clear Default on Fixed Cost Securities 8. [...]
This article throws light upon the top seventeen factors determining the capital structure. The factors are: 1. Financial Leverage 2. Growth and Stability of Sales 3. Cost of Capital 4. Risk 5. Cash Flow Ability to Service Debt 6. Nature and Size of a Firm 7. Control 8. Flexibility 9. Requirements of Investors 10. Capital Market Conditions 11. Assets Structure [...]