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What is ‘Capital Structure’? Explain the features of an ap

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What is ‘Capital Structure’? Explain the features of an appropriate capital structure and discuss factors determining capital structure of a firm. 


Posted on : 2023-02-22 13:27:30 | Author : IGNOU Academy | View : 34

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Word Count : 698

Capital structure refers to the way in which a company finances its operations and growth, including the mix of debt and equity financing. It represents the combination of different sources of funds that a company uses to finance its assets, such as loans, bonds, stocks, and retained earnings. The capital structure of a firm has a significant impact on its financial health, profitability, and risk level. Therefore, it is essential for firms to have an appropriate capital structure that meets their specific needs and goals.

The features of an appropriate capital structure depend on various factors, including the industry, size, growth rate, profitability, tax environment, and risk appetite of the firm. However, some general characteristics of _____ ____ _____ _______ __________ _____________ ____________ __ ______ _______ _____________ _____________.
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Degree : MASTER DEGREE PROGRAMMES
Course Name : Master in Business Administration
Course Code : MBA
Subject Name : Accounting and Finance for Managers
Subject Code : MS 4
Year : 2023



IGNOU MS 4 Solved Assignment 2023
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Related Question


What is ‘Capital Structure’? Explain the features of an appropriate capital structure and discuss factors determining capital structure of a firm. 


What are the various types of investment proposals? Explain the various discounted cash flow techniques used to evaluate investment proposals. 


Explain the following Accounting concepts
a) Business entity concept
b) Accrual concept
c) Money measurement concept
d) Periodicity concept 

 


Compute cash generated from Operations during the year 2021-22, from  the following data:  

Particulars   April 1, 2021 March 31, 2022
Sundry debtors   R. 30,000 R. 40,000
Sundry creditors   48,000 30,000
Outstanding expenses   3,000 6,000
Outstanding income   1,000 1,000
Stock in trade   55,000 60,000
Prepaid expenses   3,000 2,000
Accumulated depreciation      
(no retirements during the year)   50,000 60,000
Provision for doubtful accounts   1,500 2,000
Dividends payable   -- 3,000
Bills receivable   10,000 12,000
Bills payable   8,000 6,000
Net income before taxes (as per profit and loss -- 80,000

The Colour Flow Ltd’s income statement for the preceding year is presented below. Except as noted, the cost/revenue relationship for the coming year is expected to follow the same pattern as in the preceding year. Income statement for the year ending March 31 is as follows: 

Sales (20,000 bottles @ R. 25 each)   R 5,00,000
Variable costs R 3,00,000  
Fixed costs 1,00,000 4,00,000
Pre-tax profit   1,00,000
Less: Taxes (0.35)   35,000
Profit after tax   65,000

Profit after tax 65,000
1. What is the break-even point in amount and units?
2. Suppose that a plant expansion will add R 50,000 to fixed costs and increase capacity by 60 per cent. How many bottles would have to be sold after the addition to break-even?
3. At what level of sales will be company be able to maintain its present pre-tax profit position even after expansion?
4. The company’s management feels that is should earn at least R 10,000 (pre-tax per annum) on the new investment. What sales volume is required to enable the company to maintain existing profits and earn the minimum required return on
new investments?
5. Suppose the plant operates at full capacity after the expansion, what profit after tax will be earned?

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