Exercise Chapter 22
Briefly describe what Capital Structure means.
Capital structure is the relationship between debts and equity or the combination of debts and equity used by the company in order to financial overall operation and growth. Debt in this case represents form of bond issues or loan while equity is the capital that come from common stock, preferred stock or retained earnings. For example bonds and shares can be transacted in the New York security exchange (NYSE). Debts instruments include loans, bonds and debenture.
What are the four sources of Capital?
The source of capital include funds that are borrowed from lending institution in form of loan, borrowing from investor inform of preferred shares, retaining the excess of revenue over expense which comprises the percentage that remain after distribution of dividend for company that has dividend payment policy. Last source of capital include selling an additional interest in the organization though issue of shares.