Factors of capital structure, Finance Basics

Factors of Capital Structure

1. Availability of securities - This influences the company's employ of debt finance that means such if a company has enough securities, so then it can afford to employ debt finance in large capacities.

2. Cost of finance as both explicit and implicit - If low, so a company can employ more of debt or equity finance.

3. Company gearing level - if high, so then the company may not be capable to employ more equity or debt finance since potential investors would not be willing to invest in that a company.

4. Sales stability - If a company has stable sales so like profits, it can afford to utilize various finances in particular debt in such far as it can service like finances.

5. Competitiveness of the industry whether the company operates - If the company operates in a highly competitive industry, hence it may be dangerous to utilize high levels of debt since chances of servicing this debt may be lead and may low a company in receivership.

Posted Date: 1/30/2013 2:48:35 AM | Location : United States







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