Distinguish between capitalisation and capital structure
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Capitalization
The word capitalize means to record the amount of an item in a balance sheet account as opposed to the income statement. (The accounts in the general ledger and in the chart of accounts consist of two types of accounts: balance sheet accounts and income statement accounts.)
capital structure
A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. there are three structures followed by the companies
1.Maturity matching policy - Current liabilities only can finance by the amount of temporary current assets.
low risk
2. Aggressive policy - Current liabilities can finance by the amount of temporary current assets and permanent current assets.
too risky
3. Conservative approach - Current liabilities only can finance by a part of amount of the temporary current assets. it means temporary current assets> current liabilities.
the more safest mode to financing.
The word capitalize means to record the amount of an item in a balance sheet account as opposed to the income statement. (The accounts in the general ledger and in the chart of accounts consist of two types of accounts: balance sheet accounts and income statement accounts.)
capital structure
A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. there are three structures followed by the companies
1.Maturity matching policy - Current liabilities only can finance by the amount of temporary current assets.
low risk
2. Aggressive policy - Current liabilities can finance by the amount of temporary current assets and permanent current assets.
too risky
3. Conservative approach - Current liabilities only can finance by a part of amount of the temporary current assets. it means temporary current assets> current liabilities.
the more safest mode to financing.
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