BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Equity
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Debt
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Both Equity and Debt
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Retained Earnings
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Detailed explanation-1: -Proportion of debt in the total capital determines the overall financial risk.
Detailed explanation-2: -Financial risk refers to the likelihood of losing money on a business or investment decision. Risks associated with finances can result in capital losses for individuals and businesses. There are several financial risks, such as credit, liquidity, and operational risks.
Detailed explanation-3: -A company’s capital structure-essentially, its blend of equity and debt financing-is a significant factor in valuing the business. The relative levels of equity and debt affect risk and cash flow and, therefore, the amount an investor would be willing to pay for the company or for an interest in it.
Detailed explanation-4: -Capital Structure refers to the proportion of money that is invested in a business. It has four components and it includes Equity Capital, Reserves and Surplus, Net Worth, Total Borrowings.
Detailed explanation-5: -The key factors influencing capital structure decisions to be investigated include industry leverage, profitability, firm size, growth opportunities, asset tangibility, expected inflation, and stock market return.