Question

The term 'capital structure' implies ____________.

• A. Share capital+Reserves+Long-Term Debts
• B. Share Capital+Long and Short-Term Debts
• C. Share Capital+Long-Term Debts
• D. Equity and Preference Share Capital

Answer 1

The correct option is A Share capital+Reserves+Long-Term Debts

“Capital structure of a company refers to the composition or makeup of its capitalization and it includes all long-term capital resources viz., loans, reserves, shares and bonds.” The capital structure is made up of debt and equity securities and refers to permanent financing of a firm.

Its composed of long-term debt, preference share capital and shareholders funds. For raising long-term finances, a company can issue three type of securities viz., equity shares, preference shares and debentures. A decision about the proportions among these types of securities refers to the capital structure of an enterprise.