The mix of debt and equity value is know as the firms capital structure Def: capital structure refers to the composition of a firms financing consists of equity cost of capital The capital structure should pride the minimum cost of capital i.e the cost of capital < the rate of return control The control of company is head in the hands of a board of directories elected by the equity If they wish to retain control our the company. They should not permit to issue future equity shares to the public

1. CAPITAL STRUCTURE
The mix of debt and equity value is know as the firms
capital structure
Def: capital structure refers to the composition of a
firms financing consists of equity

2. Factors Affecting Capital Structure
 cost of capital
The capital structure should
pride the minimum cost of
capital
 i.e the cost of capital <
the rate of return

3. CONTROL
• The control of company is head in the hands of a board of
directories elected by the equity
• If they wish to retain control our the company. They should
not permit to issue future equity shares to the public

4. Requirement
• A company should also fulfil the local requirement when
its capital structure is firmed
• For eg: the banking company's are permitted to issue
only equity shares as for the banking company’s
regulation etc.

5. Size of the company
 Small size business firms capital structure generally
consists of loans from banks and repainted profits
while on the other hand, big company's having good
will, stability and on established profit can easily go
for issuance shares and debentures

6.  When the company require funds for permanent
investment it should prefer equity share capital
Period of financing

7. Government policies
Capital structure is also influenced by government regulations for
instant banking company’s can raise funds by issuing share capital
alone not any other kind of security similarly it is compulsory for
other company's to maintain a given debt-equity ratio while raising
funds