Gujarat BoardEnglish MediumSTD 12 CommerceOCMFINANCIAL MANAGEMENT3 Marks
Question
What is capital structure? Explain.
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Answer
The combination of different sources utilized by the company to raise necessary capital for running the company is called the capital structure.
According to Hogland, “Capital structure means the proportion and magnitude of different securities issued and sources utilized by a company to raise its finance.”
Company can obtain necessary capital funds from various sources. It can raise capital by issuing various types of securities such as equity share, preference share, debenture, etc.
In this context, Gesternberg says that “Decisions regarding type of securities are reflected in the capital structure of the company.”
It is the responsibility of the finance manager to determine the proportion of various types of securities to be issued.
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