Capital Structure - Meaning, Gearing, Factors for determining
Capital structure is the composition of different sources of funds like long-term liabilities, short-term liabilities like bank credit (overdraft).
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Capital Structure: Find Capital Structure Definition and factors to be considered in its formulation process. In this article you can find complete details for Capital Structure like Meaning of Capital Structure, Capital Structure Gearing, Details for Highly geared companies, Low geared companies, Size of a company, Condition of economy, Condition of sales, Legal provisions etc. Recently we have provided complete details on Accounting Rate of Return.If you like this article then please like us on Facebook so that you can get our updates in future ……….and subscribe to our mailing list ” freely “From capital structure point of view we can classify the business entities into two different categories asFactors to be considered while determining capital structure :During the period of economic growth a company can gather more funds if it issues shares in the primary market because there is a chance that the optimistic behaviour of public will make them to purchase the shares at high amount of premium ,and this is not possible in case of down fall/recession of economy.Every entity depends on its form should comply with many laws and regulations. For example in India there's no practice of issuing irredeemable preference stock and banking companies should not procure funds through issue of other than shares. Recommended Articles
Meaning Capital structureEach and every business concern irrespective of its position whether big, medium or small, or manufacturing or servicing what ever it could be, needs capital to carry on its operations smoothly and to achieve its objectives. However, the actual amount of capital required should be neither more nor less than the amount which is actually required and gainfully employed. "Capital structure is the composition of different sources of funds like long-term liabilities, short-term liabilities like bank credit (overdraft) , and preferred capital which make up the funds with which any business concern finances its assets and its day today operations." Different sources of funds through which a company procures funds impose many restrictions on the company , thus ultimately they are to be selected after proper and adequate , appropriate planning and past experience.
Capital structure - Gearing :Gearing is an indication of a company's leverage in terms of its usage of equity funds and other debt sources. It's an important concept that every one should be aware before thinking about their upcoming or current capital structure.