Which of the following is not a factor determining the capital structure.

Cash flow position

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Diversification

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Tax rate

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Floatation costs

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Solution

The correct option is B
Diversification

Diversification is not a factor determining the capital structure.

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Similar questions

Q. Explain the following as factors affecting the choice of capital structure:
(i)Cash flow position
(ii)Cost of equity
(iii)Floatation costs
(iv)Stock-market conditions

Q. Explain the following factors which affect the choice structure of a company:-
(a) cash flow position (b) Tax rate.

Q. Explain how (i) Risk consideration and (ii) Tax Rate affect the choice of capital structure.

Q. 'Viyo Ltd.' is a company manufacturing textiles. It has a share capital of Rs

60

lakhs. The earning per share in the previous year was

R s . 0.50

. For diversification, She company requires additional capital of

R s . 40

lakhs. The company raised funds by issuing

10 %

debentures for the same. During the current year the company earned profit of Rs

8

lakhs on capital employed. It paid tax @

40 %

.
(a) Slate whether the shareholders gained or lost, in respect of earning per share on diversification. Show you calculations clearly.
(b) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.

Kay Ltd is a company manufacturing textiles. It has a share capital of Rs. 60 lakhs. In the previous year, the earning per share was Rs. 0.50. For diversification, the company requires additional capital of Rs. 40 lakhs. The company raised funds by issuing 10% debentures. During the year the company earned a profit of Rs. 8 lakhs on the capital employed. It paid tax @ 40%.

(i) State whether the shareholders gained or lost, concerning earning per share on diversification. Show your calculations clearly.

(ii) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.

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Which of the following is not a factor determining the capital structure.

The correct option is B Diversification Diversification is not a factor determining the capital structure.

The correct option is B
Diversification

Diversification is not a factor determining the capital structure.