The document discusses capital structure, which refers to the composition and proportions of various capital sources like loans, reserves, shares, and bonds that make up a company's total capital (capitalization). It also discusses the impacts of leverage and different capital structure alternatives on earnings per share. Over-capitalization occurs when a company's earnings are insufficient to provide a fair return on its investments, while under-capitalization means a company's capital is less than what is required.

1. CAPITAL STRUCTURE

9. Particulars Alternative I Alternative II Alternative III EBIT 8.00 8.00 8.00 Less: Interest - 2.00 - Earning after Interest and before Tax 8.00 6.00 8.00 Less: Tax 50% 4.00 3.00 4.00 EAT 4.00 3.00 4.00 Less: Preference Dividend - - 2.00 Earnings available to Equity Shareholders 4.00 3.00 2.00 No. of Equity Shares 40,000 15,000 15,000 4,00,000 3,00,000 2,00,000 EPS Rs.10 Rs.20 Rs.13.33