The selection of the optimal capital structure
Not what you're looking for?
What are the main factors which determine the selection of the optimal capital structure? Why and how will investors benefit from capital restructuring? Please Explain the two adequately.
Purchase this Solution
Solution Summary
The main factors which determine the selection of the optimal capital structure and why and how investors will get benefit of capital restructuring is explained in detail in the solution
Solution Preview
Hello
Please see my response after your questions. Feel free to contact for any further clarification. Hope this is useful to you. Thanks
What are the main factors which determine the selection of the optimal capital structure? Why and how will investors benefit from capital restructuring? Please Explain the two adequately
Response:
Capital structure of the firm is the mix of different sources from where the long term funds required for business may be raised. The capital structure is said to be optimal when the firm has selected such a combination of equity and debt so that the wealth of the firm is maximized. Following are the main factors which determine the selection of the optimal capital structure:-
1. Financial risk:-
Financial risk is of two type; risk of cash insolvency and risk of variation in expected earnings available to equity share holder. Risk of cash insolvency is due to higher proportion of debt in capital structure. It increases company's fixed charges i.e. interest irrespective of fact whether it ...
Purchase this Solution
Free BrainMass Quizzes
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.