BOODHOO Roshan ASc Finance, BBA (Hons) Finance, BSc (Hons) Banking & International Finance (Email: [email protected] ; Tel: +230-7891888) GJ-IMT,MOHALI ANUJ KUMAR SRIVASTAVA Page 24 of 91
Methodology Methodology The methodology adopted for the study was as follows: Familiarization, examination and evaluation of the procedures relating to capital structure and capital expenditure. Collection of relevant data form company records and cross checking of this data. Calculations of financial ratios, parameter and norms, as also their financial implications. Broadly the data were collected for the report on the project work has been through the primary and secondary sources. The primary data is collected by various approaches so as to give a precise, accurate, realistic and relevant data. The main goal in the mind while gathering primary data was investigation and observation. The ends were thus achieved by a direct approach and personal observation from the officials of the company. The other staff members and the employees were interviewed for the sake of maintaining reasonable standard of accuracy. The secondary data as it has always been important for the completion of any report provides a reliable, suitable equate and specific knowledge. The annual reports, the fixed asset register and the Capex register provided the knowledge and information regarding the relevant subjects. The valuable cooperation and continued support extended by all associated personnels, head of the department, division and staff members contributed a lot to fulfil the requirement in the collection of data in order to present a complete report on the project work. GJ-IMT,MOHALI ANUJ KUMAR SRIVASTAVA Page 25 of 91
Capital Structure: Theory and Analysis Capital Structure Financing decisions involve raising funds for the firm. It is concerned with formulation and designing of capital structure or leverage. The most crucial decision of any company is involved in the formulation of its appropriate capital structure. The best design or structure of the capital of a company helps the management to achieve its ultimate objectives of minimising overall cost of capital, maximising profitability and also maximising the value of the firm. The capital structure decision of a firm is concerned with the determination of debt equity composition. Capital structure ordinarily implies the proportion of debt and equity in the total capital of a company. The term capital may be defined as the long – term funds of the firm. Capital is the aggregation of the items appearing on the left hand side of the balance sheet minus current liabilities. In other words capital may be expressed as follows: Capital = Total Assets – Current Liabilities. Further, capital of a company may broadly be categorised into equity and debt. The total capital structure of a firm is represented in the following figure: GJ-IMT,MOHALI ANUJ KUMAR SRIVASTAVA Page 26 of 91
Established companies generally have track record of their profit earning capacity, which helps them to create their creditworthiness.
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