Essay - Main Considerations to Influence a Firm's Capital Structure Practical Factors...


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Main Considerations to Influence a Firm's Capital Structure

Practical factors influencing capital structure of a company

This report will present insights about the financial issues a corpor*****te must take into consideration when thinking about developing its operations or ***** consolidating ***** position on the market. The ***** structure is a sensible issue that will be tackled alongside practical considerations. In ***** end, the author ***** highlight his conclusions on the topic.

Introduction

Besides its savings and investments, a particular company must rely on foreign resources ***** financing in order to develop its activities or consolidate the corporate ***** on the market. Among ***** long term financing means one could mention common ***** preferential s*****cks, reinvested profit and ***** term liabilities. ***** capital structure is different from the ***** structure of a corporation, which additionally includes other sources of capital, accounts payables and other types of liabilities - wages to employees, unpaid dividends to shareholders. The capital structure of a ***** is to be selected according to many criteria, which will further on present in this paper. Funds, which are the engine behind the performance of a comp*****ny on the market, must be raised by all means ***** methods - from the creditors, suppliers, banks, populati*****, financial institutions. In the next paragraphs, we shall discuss the ***** that affect the corporate decision in respect to ***** capital structure, offering empirical examples that best present the situation.

***** affecting the capital structure

In the ideal economic world, the value of a company is independent of its capital structure. Or, in other words, the f*****ancing ***** of a company are not considered ***** estimating the real corporate value, the market position ***** that company. But in the reality, different factors affect ***** ***** *****, as ***** ***** see in the ***** paragraphs.

1) Capital structure and time are strongly correlated terms, with the historic elements affecting the ***** capital ***** of the ***** to a great extent. For example, firms from the past may have been more pr***** to finance their long term activities and plans than companies do it nowadays. Let us make a comp*****rison between companies ********** and the behavior of companies back in ***** '80s. The financial statements indicate that, in the *****, companies decided to accept an extra financial leverage, reaching an important amount ***** the total assets, in order to consolidate the corporate control. (Harris and Raviv -1991, page 334). ***** situation is *****day somehow ***** because commercial entities prefer to balance the assets with ***** *****. The differentiation policy is well used also in the financial market - managers engage in different financial projects in order to dim*****ish the risk - for example ***** shares, bonds ***** other securities, take loans and cred***** and ask for refundable funds (subsidies, structural funds). The business risk notion is highly related ***** ***** leverage and ***** structure - as a company with a high financial burden could be put in the position ***** default and eventually bankruptcy.

*****). The size

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