--%>

External factors which influencing the capital structure

Write down the external factors which influencing the capital structure?

E

Expert

Verified

The external factors that are influencing the capital structure are illustrated below :-

i) Economic Conditions : If the economy is in state of despair, preference is given to equity form of capital that involves fewer amount of risk however it is avoided in some cases where the investor is not set to take the risk. In this case companies go on with the borrowed capital.

ii) Interest Rates level : Form of borrowed capital will be deferred if the funds are accessible in high rates of interest however rising is not favorable.

iii) Lending Policy : If policy is difficult to comprehend and not flexible then it is better to go with the borrowed capital.

iv) Taxation Policy : This policy must be viewed from both the sides from individual and corporate perspective. From the individual viewpoint both interest and dividend will be taxable in hands of lender.

   Related Questions in Business Economics

  • Q : Explain about the Payments for using

    Payments for the use of land, capital and labor are respectively termed as: (w) rent, wages and profits. (x) rent, interest and wages. (y) dues, profits and depreciation. (z) fruit, profits and money.

    Q : Briefly state the pros and cons of

    Briefly state the pros and cons of Proprietorship?

  • Q : Example of self interest to define

    The concept of _____ was demonstrated by _____ along with the quotation, “The defeat of a bit finger would remain the average European from sleeping which night,... but, given he never saw them, he will snore along with the most profound security over the loss o

  • Q : Determine the relative cost of a product

    If banana divides are $2, CD disks are $10, and SCUBA vacations are $360, then what is the relative cost of a SCUBA vacation in phrases of a CD disk: (i) 36 disks. (ii) 360 disks. (iii) 180 disks. (iv) 20 disks. (v) 3,600 disks.

    Q : Describe unexpected deflation Describe

    Describe unexpected deflation?

  • Q : David Hume statement regarding money in

    In modern parlance, David Hume statement regarding money which is Tis none of the wheels of trade. And tis the oil, was referring to the notion that money: (i) is relatively costly to produce. (ii) facilitates divisions of labor and specialization and

  • Q : How do households dispose of their

    How do households dispose of their income?

  • Q : Calculate the short-run profit or loss

    A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The cost of each good is $10. Calculate the firm's short-run profit or loss. w) loss of $6,000. x) profit of $6,000. y profit of $30,000. z) There is insufficient

  • Q : Economic crisis situation in Europe

    Question: Describe the present economic crisis situation in Europe.   Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world i

  • Q : Describe the term cost of capital

    Briefly describe the term cost of capital and also illustrate out its significance?