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Three Types of Capital Structure: Equity, Debt, Debt-Equity

A 100% equity structure is always preferable to a debt-equity mix or a 100% debt structure. Comment on the statement. Also discuss the pros and cons of the three types of capital structure.

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100% equity
Even though the firm having 100 % equity is having special advantages, it cannot be said that 100 % equity is always preferable to debt equity mix or 100 % debt because each option is having its own advantages.

Advantages of 100 % equity in the capital structure:
a) Funds invested as equity capital is committed to the business. Investors will sell the shares only when the company is doing well in the market.
b) Equity finance holders are interested in the growth, profitability and increase in the value of the business by monitoring the development of the company. Therefore, it is better to the equity because equity holders are the owners but debenture holders are creditors of the company.
c) The company can declare dividend when there is profit .If there is no profit, it is not obligatory on the part of the firm to pay dividend to equity holders .On the other ...

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