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Capital Structure

According to C.W. Gerstenberg, “The types of securities to be issued  and proportionate amounts that make up the capitallsation s known as capital stature. Capital structure refers to the proportion f different kinds of securities issued by a company to raise long-term finance. Thus capital structure denotes : (i) the types of securities issued (equity shares, preference shares and debentures), and (ii) the relative proportion of each type of security. In other words, capital structure represents the proportion f equity capital and debt capital used for financing the operations of a business. Proper balance must be obtained in the following securities or resources of finance to maximize the wealth of the equity shareholders of the company:

(a)    equity shares,
(b)    preference shares, and
(c)    debentures.

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