An evaluation of capital structure and profitability of business organisation

Thesis Overview

<p> </p><p><strong>1.0 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</strong><strong>&nbsp;INTRODUCTION</strong></p><p><strong>1.1 BACKGROUND OF STUDY</strong></p><p>The most important decision all corporate managers should take into consideration is the way in which the long-term capital requirements of their companies should be financial. Capital structure is the permanent financing of a firm represented primarily by equity and long-term liability without including all short-term credits. Many factors have to surface in order to determine the capital structure of a business organisation. These factors are what the financial managers consider first in order to determine appropriate capital structure suitable to his firm. Some of the factors are: cost of capital, floation costs, size of the company, government policies and market condition. The combination of debt and equity has some implication. The first is that debt-equity ratio, which is regarded as an indicators of risk. According to Samuel etal (1992:44) high fixed interest commitment which must be paid by the business organisation irrespective of whether profits are made or not. Debt capacity which is the ability of a firm to service its debt payment of interest and</p> <br><p></p>