Question

There is no hard and fast rule for the proportion of owned funds and borrowed funds.

Answer 1

This statement is 'True' because of the following reasons :
(i) The pattern of capital structure of various firms differs widely.
(ii) So there is no hard and fast rule for the proportion of owned funds and borrowed funds.
(iii) Many factors are to be considered to determine the best pattern of capital structure for the firm.
(iv) There are internal factors such as requirement of capital, size and nature of business, growth of business, cash position and adequate earnings of the firm, period of finance, development of the firm, trading on equity differs from firm to firm.
(v) One the other hand external factors such as market conditions, cost of capital, attitude of investors and financial institutions, govt. policies and regulations also differ for different firms.
(vi) Thus the capital requirement in the owned and borrowed capital also differs.