Question

31. What is meant by capital structure? Explain any five factors which affect the

choice of capital structure of a company.​

Answer 1

Answer:

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This ratio tells us about the cash payments to be made (e.g., preference dividend, interest and debt capital repayment) and the amount of cash available. Better ratio means the better capacity of the company for debt payment. Consequently, more debt can be utilised in the capital structure.

Answer 2

Answer:

Capital structure in corporate finance is the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. It refers to the make up of a firm's capitalisation.

Explanation:

 factors affecting the choice of capital structure

 1. cash flow position

 2. interest coverage ratio

 3. (DSCR) Debt Service Coverage Ratio

 4. (ROI) Return On Investment

 5. cost of debt

 6. Tax rate

 7.  cost of equality

 8.  Flotation cost

 9.  Risk Consideration

 10. flexibility

 11.  control

 12.  Regulatory Frame work

 13. Capital structure of other companies

 14. stock Market Conditions