SYNOPSIS ON

A STUDY ON CAPITAL STRUCTURE AT KARNATAKA

POWER CORPORATION LIMITED

Dissertation Submitted In Partial Fulfillment of the Requirements for the

Award of the Degree Of
MASTER OF BUSINESS ADMINISTRATION
Of
BANGALORE UNIVERSITY

By
RAPALLI.SURENDRA BABU
Reg. No. 12UHCMA074
Under The Guidance Of
Dr .R. RANGANATH
EAST WEST COLLEGE OF MANAGEMENT
#63, off Magadi road, Vishwaneedam post, Bangalore-560091
2014

LITERATURE REVIEW
The ultimate objective of every company is to increase firms performance which in fact,
associated with firms strategic decisions. Decisions regarding choice of leverage are one of the
strategic decisions; firms often take this type of decisions to increase their performance.
Capital structure is the composition of the liability of a firm or particularly is the proportional
participation of the numerous financing sources. Such as the equity, and debt it included the
short term and long term debt Brealey and Myers (1992), Weston & Brigham (2000) and
Gitman (1997).
Modigliani and Miller (1958) argued that capital structure its theories and relationship with firms
performance has been creating issue in accounting and corporate finance literature. They further
argued that under preventive assumptions of capital market capital structure is unsuitable in
determining firm performance or value. According to this intention, firm value is not the
combination of the securities it issue but it is determined by real assets.

1. According to Franco Modigliani and Merton Miller:

"Forms the basis for modern thinking on capital structure, though it is generally viewed as a
purely theoretical result since it disregards many important factors in the capital structure
process. The theorem states that, in a perfect market, how a firm is financed is irrelevant to its
value. This result provides the base with which to examine real world reasons why capital
structure is relevant, that is, a company's value is affected by the capital structure it employs.
Some other reasons include agency costs, taxes, and information asymmetry. This analysis can
then be extended to look at whether there is in fact an optimal capital structure: the one which
maximizes the value of the firm.

2. According to James c. Van Horse:

"The mix of a firm's permanent long term financing represented by debt, preferred stock, and
common stock equity".

3. According to Prasanna Chandra:

"The composition of a firm's financing consists of equity, preference, and debt".

4. According to Gerstenbeg:
"Capital structure of a company refers to the composition or make-up of its capitalization and it
includes all long-term capital resources viz: loans, reserves, shares and bonds".

5. According to Jean Murray:

The capital structure of a business is the mix of types of debt and equity the company has on its
balance sheet. The capital or ownership of a business can be evaluated by knowing how much
of the ownership is in debt and how much in equity. The company's debt might include both
short-term debt and long-term debt (such as mortgages), and equity, including common stock,
preferred shares, and retained earnings.

NEED FOR THE STUDY

It's very necessary that companies should have optimal capital structure that can maximize the
price of the companys stocks.
Companies can choose a mix of financing options to finance its assets but it is very necessary
that they are choose the financing options that maximize its overall value.
For an equity investor, a strong balance sheet is an important consideration for investing in a
companys stock and capital structure is one of the important measures of evaluating the
strength of the balance sheet which reflects the important of capital structure

OBJECTIVES

To analysis, capital structure of (KPCL) Karnataka power corporation limited.

To analyze the earning per share of (KPCL) Karnataka power corporation limited.
To find out the optimal capital structure of the company.
To know the profitability of the company.
To know about the capital efficiency of the company.

HYPOTHESIS:

Hypothesis test on earning per share of KPCL.

H1-There is no effective from earning per share of KPCL.
Hypothesis test on profitability of the company.
H0-There is a more profitability of the company.

SCOPE OF THE STUDY

The projects deals with the capital Structure as general and how the capital structure aids in
various important finding and provides useful information for decision making. The project is an
attempt to seek an insight into the aspects that are involved in the capital structuring and
financial decisions of the company.
The study is confined to understand and analyze the changes in earning per share, dividend policy,
and managerial decisions due to the changes in capital structure of (KPCL) Karnataka power
corporation limited.

METHODOLOGY
The nature of the study of this project will be Descriptive study. In Descriptive study, one has to
use facts or informations which are already available and analyze these to make critical
evaluation of the material. The objective of this research is to generate new ideas.

DATA COLLECTION
Primary data

A primary data has been collected through interview schedule with executives and also with
employees of Karnataka power corporation limited (finance department)

Secondary data
Secondary data analysis saves time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, provides larger and higher-quality databases that
would be unfeasible for any individual researcher to collect on their own Secondary data:
published data and the data collected in the past is called secondary data.

By using company journals, reports and documents.

By using the Annual reports of the company.

By using company website.

I. PLAN OF ANALYSIS
Data will be analysis through charts, graph and table.

II. CHAPTER SCHEME

Chapter One:

Introduction

Chapter Two:

Profile of the Organizations

Chapter Three:
Chapter Four:
Chapter Five :

Research and Design

Data analysis and Interpretation
Summary of Findings, Conclusions and Suggestions.

SIGNATURE OF THE STUDENT

Reg No.12UHCMA074

SIGNATURE OF THE GUIDE

Dr.RANGANATHA
(Assistant

Professor)