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Capital Structure
The long-term financing of the company is funded through the capital structure owned by the company. It
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caters the whole company being a unique blend of financial sources, equity and debt. The capital developments mainly hang about a midway of equity and debt. Gearing is the only way to estimate debt in this context. The complications are obvious because other types of capitals also exists that are formed by the mixture of equity and debt. The economic effect of preference share is mot as closer to equity as debt as the returns are fixed but the debt is counted in terms of equity when it is convertible in future. In short the companys stability or internal and external threats and opportunities are revealed by debt equity ratio, which is capital structure. The highly levered firm is considered at low risk than the company that is in high debt. The total value of the company is that is combination of its debts and equity is not affected by the capital structure as explained by the financial theories. But some time it does affects and is regarded as capital structure irrelevance. Strategy
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References
Lyandres, Evgeny and Zhdanov, Alexei. (2007) Investment Opportunities and Bankruptcy Prediction.SSRN. Myers, Stewart C.; Majluf, Nicholas S. (1984). "Corporate financing and investment decisions when firms have information that investors do not have". Journal of Financial Economics 13 (2): 187221.
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