1. Introduction to Capital Structure The term capital structure refers to the relationship between the various long-term source financing such as equity capital, preference share capital and debt capital. Deciding the suitable capital structure is the important decision of the financial management because it is closely related to the value of the firm. A company may raise its total capital [...]
In the modern free-market economy, the process of capital formation consists of the following three stages: 1. An increase in the rate of real savings so that resources that would have been devoted to the production of consumption goods should be released for the purpose of capital formation. 2. Existence of a good financial system so that the available resources [...]
In order to raise capital formation in the economy we have first to raise ratio of surplus to capital or rate of surplus to national income and then measures have to be adopted to mobilize this surplus for purposes of productive investment. 1. Raising the Ratio of Surplus to Capital: In this connection the distinction between potential economic surplus and [...]