MANAGEMENT

Detailed explanation-1: -Capital structure refers to the specific mix of debt and equity used to finance a company’s assets and operations. From a corporate perspective, equity represents a more expensive, permanent source of capital with greater financial flexibility.

Detailed explanation-2: -The different types of funds that are raised by a firm include preference shares, equity shares, retained earnings, long-term loans etc.

Detailed explanation-3: -Capital Structure is a combination of different types of long-term sources of funds. Financial Structure is a combination of different types of long-term as well as short-term sources of funds. The Capital Structure is a part of the Liabilities section of the Balance Sheet.

Detailed explanation-4: -Capital Structure decision refers to deciding the forms of financing (which sources to be tapped); their actual requirements (amount to be funded) and their relative proportions (mix) in total capitalisation. Value of the firm = EBIT. Overall cost of capital / Weighted average cost of capital.

Detailed explanation-5: -The term “capital structure” refers to: long-term debt, preferred stock, and common stock equity.