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Under the capital structure, decision the proportion of long-term sources of capital is determined. Most favourable proportion determines the optimum capital structure. That happens to be the need of the company because EPS happens to be the maximum on it. Some of the chief factors affecting the choice of the capital structure are the following:

 

(1) Cash Flow Position:(2) Interest Coverage Ratio-ICR:(3) Debt Service Coverage Ratio-DSCR:

(4) Return on Investment-ROI:(5) Cost of Debt:(6) Tax Rate:(7) Cost of Equity Capital

Answer

Under the capital structure, decision the proportion of long-term sources of capital is determined. Most favourable proportion determines the optimum capital structure. That happens to be the need of the company because EPS happens to be the maximum on it. Some of the chief factors affecting the choice of the capital structure are the following:

 

(1) Cash Flow Position:(2) Interest Coverage Ratio-ICR:(3) Debt Service Coverage Ratio-DSCR:

(4) Return on Investment-ROI:(5) Cost of Debt:(6) Tax Rate:(7) Cost of Equity Capital:

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