Capital structure project for MBA finance from Hetero

What Does Capital Structure Mean?

A mix of a company’s long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.

Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure. 

Investigator explains Capital Structure

A company's proportion of short and long-term debt is considered when analyzing capital structure. When people refer to capital structure they are most likely referring to a firm's debt-to-equity ratio, which provides insight into how risky a company is. Usually a company more heavily financed by debt poses greater risk, as this firm is relatively highly levered.

The capital structure of a company is the particular combination of debt, equity and other sources of finance that it uses to fund its long term financing. 

This simple division is somewhat complicated by the existence of other types of capital 

Considering the division between debt and equity is sufficient to understand the issues involved. 

Simple financial theory models show that capital structure does not affect the total value (debt + equity) of a company. This is not completely true, as more sophisticated models show. It is, nonetheless, an important result, know as capital structure.

This project is done from HETERO DRUGS LIMITED Hyderabad

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