Capital structure meaning

Capital structure

To run and manage a company funds are required from the start till the end. If the funds are inadequate the business suffers, if the funds are not properly managed the entire organization suffers. So it is very essential for every firm to have a optimum capital structure for the smooth working of the business.

Capital structure is a qualitative term. It is a decision about the proportion among type of securities of an enterprise. For example;

Equity share capital 100000 58.82%
Preference share capital 50000 29.41%
Long term debentures 20000 11.77%

Thus, capital structure means proportionate amount that make the capitalization.

Capitalization it refers to the total amount of securities issued by the company. For example

Equity share capital 100000
Preference share capital 50000
Long term debentures 20000
Total 170000

Financial structure refers to the liability side of the balance sheet. It includes debt as well as equity.

Equity share capital 100000
Preference share capital 50000
Long term debentures 20000
Surplus capital 12000
Current liability 18000
Total 200000

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