Q1 of 18 Page 253

What is meant by capital structure?

Capital structure is the proportion of debt and equity used for financing business operations. It represents the proportion of debt capital and equity capital in the capital structure. It is not easy to define the best capital structure for a firm. It should increase the value of the equity share or maximize the wealth of the equity shareholders.

Capital structure= Debt/ Equity


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2

State the two objectives of financial planning.

 3

Name the concept of financial management which increases the return to equity shareholders due to the presence of fixed financial charges.

 4

Amrit is running a ‘transport service’ and earning good returns by providing this service to industries. Giving reason, state whether the working capital requirement of the firm will be ‘less’ or ‘more’.

 5

Ramnath is into the business of assembling and selling of televisions. Recently he has adopted a new policy of purchasing the components on three months credit and selling the complete product in cash. Will it affect the requirement of working capital? Give reason in support of your answer