TABLE OF CONTENTS

S.No DESCRIPTION PAGE NOS

1-3
1.1 INTRODUCTION
1.2 NEED OF STUDY
CHAPTER - 1 1.3 SCOPE OF STUDY
1.4 OBJECTIVES OF STUDY
1.5 RESEARCH METHODOLOGY
1.6 LIMITATIONS
CHAPTER – 2 2.1 REVIEW OF LITERATURE

2.2 CONCEPTUAL FRAME WORK

CHAPTER - 3 3.1 COMPANY PROFILE
3.2 INDUSTRY PROFILE
CHAPTER - 4 DATA ANALYSIS AND
INTERPRETATION

CHAPTER - 5 FINDINGS, SUGGESTIONS AND

CONCLUSIONS

CHAPTER - 6 BIBLIOGRAPHY
CHAPTER – 1
 1.1 INTRODUCTION OF CAPITAL
STRUCTURE
The term capital structure refers to the relationship between the various
long-term source financing such as equity capital, preference share capital
and debt capital. Deciding the suitable capital structure is the important
decision of the financial management because it is closely related to the
value of the firm. 

A company may raise its total capital from various sources such as shares,
debentures and other long term borrowings. There is no fixed charge on
equity shares but on preference shares and debentures it is compulsory to
pay dividend or interest respectively. Thus debentures and preference
shares create fixed charge.

Capital structure refers to the kinds of securities and the proportionate

amounts that make up capitalization. It is the mix of different long-term
sources such as equity shares, preference shares, debentures, long-term
loans and retained earnings. 

Meaning of Capital Structure

Capital structure is that part of financial structure, which represents long-

term sources. The term, ‘capital structure’ is generally defined to include
only long-term debt and total stockholders’ investment. It is the mix of
long-term sources of funds, such as equity shares, reserves and surpluses,
debenture, long-term debt from outside sources and preference share
capital.

“Capital structure may consist of a single class of stock, or it may

comprise several issues of bonds and preferred stock, the characteristics of
which may vary considerably”. In other words, capital structure refers to
the composition of capitalisation, i.e., to the proportion between debt and
equity that make up capitalisation.

Capital structure is indicated by the following equation:

Capital Structure = Long-term Debt + Preferred Stock + Net worth (or)

Capital Structure = Total Assets – Current Liabilities

Thus, the capital structure of a firm consists of shareholders’ funds and

debt. The inherent financial stability of an enterprise and risk of
insolvency to which it is exposed are primarily dependent on the source of
its funds as well as the type of assets it holds and relative magnitude of
such asset’s categories.

The above definitions have given different meanings of capital structure,

and not about optimal capital structure. The following paragraph gives the
meaning of optimum capital structure. 

Definitions of Capital Structure

Capital structure refers to the mix of a firm’s capitalization i.e., mix of

long term sources of funds such as – debenture, preference share capital,
equity share capital and retained earnings for meeting total capital
required.

The term capital structure refers to the relationship between the various
long term sources financing such as equity capital, preference share capital
and debt capital.

Capital structure is one of the most vital and complex areas of decision
making to any organization due to its relationship with other financing
variable and its closely related to the value of the firm. Therefore it’s very
important for a finance manager to understand the company’s capital
structure and its relationship with returns and wealth maximization.

According to Gerstenbeg, “capital structure of a company refer to the

composition or make-up of its capitalization and it includes all long term
capital resources viz., loans, reserve, share, and bonds.

According to Schwartz, “The capital structure of a business can be

measured by the ratio of various kinds of permanent loan and equity
capital to total capital”.
1.2 NEED OF STUDY
There is a need for the study on the capital structure
-------------------------------- because to find out that the ultimate goal
of any organization is to maximize the wealth of the shareholders by
generating greater amounts of profit. And aiming for sustainable and
consistent growth in profits is impossible without managing the
costs efficiently. Out of this predominant requisite, the Capital
Structure and its study derive significance

It prevents over or under capitalization. It helps the company

in increasing its profits in the form of higher returns to stakeholders.
A proper capital structure helps in maximizing shareholders capital
while minimising the overall cost of capital.

1.3 SCOPE OF STUDY

To scope of the study of limited to

------------------------------------------------- located at
-------------------------------------- . The scope is further limited to the study
of the capital structure.

An appropriate capital structure of a firm should have the scope for raising

funds as need arises. Thus, an appropriate capital structure should be such
as to maximise the returns on stock at the minimum level of financial risk.
It improves the proposal for an inventory with connecting the material to
the enterprise in resource planning and application of ventures in estate
development and also helps in modelling management and it impacts
credit ratings of firms in capital structure decisions

1.4 OBJECTIVES OF STUDY

 Capital structure determines the risk assumed by the firm.
 Capital structure determines the cost of capital of the firm.
 It affects the flexibility and liquidity of the firm,
 It affects the control of owners of the firm.
 It helps in creating goodwill and increase in efficiency
 It control financial discipline

1.5 RESEARCH METHODOLOGY

Research methodology is the procedure of collection analysing and

interpreting the data to diagnosis the problem and the desire level of
accuracy can be achieved to arrive at a particular conclusion. The
methodology used in the study for the completion of project and the
fulfilment of the project objectives, is as follows

Source of data

Secondary data is the data that has already been collected through primary
sources and made readily available for researchers to use for their own
research. It is a type of data that has already been collected in the past.
A researcher may have collected the data for a particular project, then
made it available to be used by another researcher. The data may also have
been collected for general use with no specific research purpose like in the
case of the national census.

SECONDARY METHOD:

 The lectures delivered by the superintendents of respective4

departments
 The data collected from the libraries , internet searches and in some
business articles

Tools used for analysis

 The tools used for analysis is both Theoretical and formula
based with some ratio analysis.

1.6 limitations
1. The study was conducted in a short span of time.
2. The data collected may be biased
3. The findings of the project are purely based on the data
collected
4. The suggestions provided may be implemented or may not be
implemented by the company
5. The attitude of the workers changes from time to time. Hence,
the result of the project may be applicable only at present.
6. The data and information was collected on the basis of one
company’s perception.