Capital Structure:

Topics;
Meaning.
Definition.
Components.
Forms.
Needs.
Factors affecting.
Essentials.
Conclusion.
 Meaning of Capital Structure;

 First part is capital , which refers to the firm’s

own money and assets .
 Second part denotes structure , which refers to
the framework designed for efficient use of
capital by the firm and remain profitable in long
run .
 2 Goals- Increase the value of the firm and
wealth maximization of share holders.
 Definition;
 Capital Structure of a company refers to the
composition or makeup of its capitalization
and includes all long term capital resources. It is
made up of debt and equity securities and refers
to the permanent financing of the firm.
( Capitalization refers to the total amount of capital
invested in a business.)
 Need Of Capital Structure;
 It determines the risk taking capacity of the firm.
 Prevents over and under capitalization.
 Determines cost of capital of the firm.
 Helps to maximize share holder’s capital while
minimizing overall cost.
 It affects the flexibility and liquidity of the firm.
 It affects the ownership control of the firm.
 Factors affecting Capital Structure;
 Nature and size of the business.
 Cost of capital.
 Control over firm.
 Capital Market Condition .
 Tax position(showing more expense to reduce tax).
 Legal Requirement.
 Financial Flexibility(for more transactions and
smooth running).
 Essentials of optimal capital
structure:
Flexibility. Efficiency.

Control. Economy.

Simplicity. Solvency.

Safety. Legal.
Conclusion;
Thus we can conclude that Capital structure is a very
essential tool for a firm for its smooth running and
long term profitability.
With this I would like to say thank you to our
teacher for giving us this opportunity to present the
topic.

Name: Alok Kumar Kar.

Roll. 07 (AGC)