Which of the following is the capital structure decision?

Determining how much debt should be assumed to fund a project is a capital structure decision.

What is an example of capital structure decision?

Therefore, capital structure is the way that a business finances its operations—the money used to buy inventory, pay rent, and other things that keep the business’s doors open. … For example, the capital structure of a company might be 40% long-term debt (bonds), 10% preferred stock, and 50% common stock.

Which of the following is a capital structure?

The term “capital structure” refers to: long-term debt, preferred stock, and common stock equity.

Which one of the following is an example of a capital budgeting decision?

The correct answer is b. deciding whether or not to open a new store.

What are the types of capital structure?

The meaning of Capital structure can be described as the arrangement of capital by using different sources of long term funds which consists of two broad types, equity and debt. The different types of funds that are raised by a firm include preference shares, equity shares, retained earnings, long-term loans etc.

What is financing decision give an example?

A firm has to decide the method of funding by assessing its financial situation and the characteristics of the source of finance. For example, interest on borrowed funds have to be paid whether or not a firm has made a profit. Likewise, borrowed funds have to be repaid at a fixed time.

What is the capital budgeting decision?

A capital budgeting decision is typically a go or no-go decision on a product, service, facility, or activity of the firm. That is, we either accept the business proposal or we reject it. 2. A capital budgeting decision will require sound estimates of the timing and amount of cash flow for the proposal.

What is capital investment decision?

Capital investment decisions are those decisions that involve current outlays in return for a stream of benefits in future years. It is true to say that all of the firm’s expenditures are made in expectation of realizing future benefits.

Which one of the following is a capital budget?

Capital Budget consists of capital receipts (like disinvestment, borrowing, loans from public or foreign governments, Reserve Bank of India, etc) and capital expenditure (like expenditure on development of machinery, health facilities, etc). Capital budgeting comprises two words — ‘capital’ and ‘budget’.

What is optimum capital structure?

An optimal capital structure is the best mix of debt and equity financing that maximizes a company’s market value while minimizing its cost of capital. Minimizing the weighted average cost of capital (WACC) is one way to optimize for the lowest cost mix of financing.

What is capital structure planning?

Capital structure planning which aims at the maximization of profits and wealth of the shareholders ensures the maximum value of a firm or the minimum cost of capital. It is very important for the financial manager to determine the proper mix of debt and equity for his firm.

What are the four capital budgeting decision criteria?

namely: 1) discounted payback period, 2) net present value, 3) modified rate of return, 4) profitability index, and 5) internal rate of return. We employ a unifying concept, cumulative present value (CPV), to highlight the commonalities among these criteria.

What is capital structure Slideshare?

MEANING OF CAPITAL STRUCTURE Capital structure refer to the proportion between the various long term source of finance in the total capital of firm A financial manager choose that source of finance which include minimum risk as well as minimum cost of capital.

Which one of the following makes the capital structure of a company irrelevant?

capital structure is irrelevant because investors and companies have differing tax rates. WACC is unaffected by a change in the company’s capital structure. the value of a taxable company increases as the level of debt increases. the cost of equity increases as the debt-equity ratio increases.

What is optimum capital structure mention its features?

An optimum capital structure has such a proportion of debt and equity which will maximise the wealth of the firm. At this capital structure the market price per share is maximum and cost of capital is minimum.

What is capital structure definition?

Capital structure refers to the specific mix of debt and equity used to finance a company’s assets and operations. … Capital structure is also the result of such factors as company size and maturity, which influence the financing options a company may have available.

What is capital structure and its theories?

In financial management, capital structure theory refers to a systematic approach to financing business activities through a combination of equities and liabilities.

What are the factors determining the capital structure?

Factors determining capital structure are given below −

Choice of investors. Capital market condition. Period of financing. Cost of financing.