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 corporate must take into consideration when thinking ***** developing its operations or about consolidating ***** position on the market. The ***** structure is a sensible issue th*****t will be tackled alongside practical considerations. In ***** end, the auth***** will highlight his conclusions on the topic.

*****troduction

Besides its savings and investments, a particular ***** ***** rely on foreign resources ***** financing in order to develop ***** activities or consolidate the c*****porate ***** on the market. Among the long term f*****ancing means one could mention common and preferential stocks, reinvested profit and ***** term liabilities. The capital structure is different from the financial structure of a corporation, which additionally includes other sources ***** capital, accounts payables and ***** types of liabilities - wages to employees, unpaid dividends to shareholders. The capital structure of a company ***** to be selected according ***** many criteria, which will further on ***** in this paper. Funds, which are the engine behind ***** performance of a company on the market, must be raised by all means and 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 its ***** structure, offering empirical examples that best present the situation.

Factors affecting ***** capital structure

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

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

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