Capital Structure | Principle of finance | BBA MBA | Tutorial in bangla | (Class:1)

Capital Structure | Principle of finance | BBA MBA | Tutorial in bangla | (Class:1)

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Hope everyone Is well. Today, we will discuss about Capital Structure from Principles of Finance. Hope everyone enjoy to learn.

What is Capita Structure?

A company's capital structure refers to how it finances its operations and growth with different sources of funds, such as bond issues, long-term notes payable, common stock, preferred stock, or retained earnings.

If you're considering investing in a company, there are many ways to determine its health. One metric to look at is its capital structure. 

Equity Capital 

Equity capital refers to the money owed by the owners or shareholders of the company. It generally consists of two sources. One is contributed capital and the other is retained earnings. 

Contributed capital refers to the money that company owners have invested at the time of opening the company or have received from the shareholders as a price for the ownership. Retained earnings, on the other hand, are a part of the profit that has been set aside separately by the organization and contributes to the strengthening of the business or for funding growth, acquisitions, and expansion.   

Debt Capital

Debt capital is referred to as the borrowed money that is utilised in business. There are different forms of debt capital.

1.Long Term Bonds: These types of bonds are considered the safest of the debts as they have an extended repayment period, and only interest needs to be repaid while the principal needs to be paid at maturity.

2.Short Term Commercial Paper: This is a type of short term debt instrument that is used by companies to raise capital for a short period of time

Optimal Capital Structure

Optimal capital structure is referred to as the perfect mix of debt and equity financing that helps in maximising the value of a company in the market while at the same time minimises its cost of capital.


Financial Leverage

Financial leverage is defined as the proportion of debt that is part of the total capital of the firm. It is also known as capital gearing. A firm having a high level of debt is called a highly levered firm while a firm having a lower ratio of debt is known as a low levered firm

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