--%>

Internal factors which influencing the capital structure

Write down the internal factors which influencing the capital structure?

E

Expert

Verified

The internal factors which are influencing capital structure are illustrated below :-

1) Cost of capital : - it is a procedure of raising the funds that engages the cost in planning the capital structure, the employ of capital must be able of earning revenue to meet the cost of capital. There are changes in this due to two reasons:

i) Interest rates are least than dividend rates.

ii) Interest paid on borrowed capital is a permissible for income tax reasons.

2) Risk factor : Company increasing the capital by borrowed capital, as it admits the risk in two ways:

i) Company manages the payment of interest and installments of borrowed capital at prerecorded rate and time devoid of being concerned about the losses and profits.

ii) Borrowed capital is safe capital in the case where the company unsuccessful to meet the contract done with the lenders of the money.

3) Control Factor : These factors have been considered through the private companies while increasing extra funds and planning the capital structure. In this company plans to elevate long term funds by issue the preference and equity shares. It does not have relation with the borrowed capital.

   Related Questions in Business Economics

  • Q : Technology in production Drawing a

    Drawing a production possibilities frontier needs the supposition that: (1) Decision makers encompass discretion over resource accessibility. (2) Technology is constant. (3) Income is fairly distributed. (4) Resources are considerably diverse. (5) At least three goods

  • Q : How might government correct this

    What divergences arise between equilibrium and an efficient output spillover benefits are present?  How might government correct this divergence?

  • Q : What do you mean by Financial Linkages

    What do you mean by Financial Linkages in U.S. and World Trade?

  • Q : Elucidate how Personal income tax is a

    Elucidate how Personal income tax is a major source?

  • Q : Problem on opportunity cost buying a

    After agonizing regarding whether to buy a hot dog or a hamburger along with his last dollar while he goes to the fair, Jeeter at last chooses the hot dog. The hamburger shows Jeeter's: (i) normative choice, because it would be more nutritious. (ii) opportunity cost o

  • Q : Major implication of invisible hand of

    The major implication of Adam Smith’s conception of an “invisible hand” was such that: (w) pursuit of individual self interest must be controlled. (x) most people lose sight of what’s good for society. (y) most

  • Q : Illustrate receipts from several

    Illustrate how receipts come from several sources in Federal Finance?

  • Q : Competition among buyers and sellers is

    Illustrate Competition among buyers and sellers is a controlling mechanism?

  • Q : Comparison between EVA and Ratio

    Comparison between EVA and Ratio Analysis: EVA helps in measuring the economic performance of the company. It is the profit earned by the firm less the cost of financing the firm’s capital. It shows that the shareholders gain when the return fro

  • Q : Wealth of Nations academic

    By the perspective of nowadays academic standards, Adam Smith must have more evidently acknowledged that several the analyses and insights for that he took credit within his Wealth of Nations had really been gleaned from the writings