What are the determinants of the capital structure?
Any type of organization or entity, whether corporation or nation, relies on capital to facilitate its operation and achieve its basic functions. As the organization structures its capital, it often determines the efficiency in which it is able to use this capital to achieve its goals. The capital structure in the organization therefore applies to the ratio of debt and its own capital, which contains these capital resources. In addition to the proportions and capital of the debt, the ratio of the long -term to the short -term debt is central for the analysis of the structure of capital. Determinants of capital structure depend on these conditions, with the main factors the size of the organization, the costs of fixed assets, organizational purposes, legal requirements, organizational inspections, investment requirements, reasons for obtaining finances, finance conditions, market conditions and flexibility, as well as investors or others who share in organizational results.
Most organizations will look for balance in the capital structure that effectIt solves organizational needs, and at the same time enables all capital to work productively. Some scientists refer to this as the "ideal" capital structure. It is essential for achieving this ideal capital structure most specific to the organization. The reconciliation of these determinants with the right combination of debt financing and equity helps to ensure consistent cash flow, profitability and required flexibility in deployment of capital resources. Examination of the capital structure in both countries around the world and businesses of all types concluded that the above -mentioned determinants of capital structure are central to almost all organizational entities.
solid assets are important for the analysis of the capital structure, because without these assets the organization cannot function, which defines their permanence rather than mention their value that fluctuates. The size of the organization is also decisive, with most cases required for larger capital resourcesfrom larger organizations or nations. The overall mission and objectives of the organization will also determine both sources of capital and how this capital comes. The structure of bureaucracy, management and control also affects how capital is structured to protect the overall integrity of the organization and its administration. Each of these determinants of the capital structure is most often directly under the control of an organization or company and can even be modified to reflect access to capital.
On the other hand, other determinants of capital structure usually require an analytical approach to ensure understanding their potential impact on the organization. The legal requirements often determine what types of capital the organization has access, such as the Parliament of the Nation, which will apply the ceiling to the amount of debt and Nation can hold. Potential financial arrangements and consideration of the use of equity are usually evaluated to determine their impacts in the short and long -term horizon. Market conditions and requirements of investors or parties involved must also beanalyzed to assess the impact on the use of various types of investment to meet organizational objectives. Each of these determinants of the capital structure is constantly taken into account, and the capital structure is revised to match the objectives of the organization with the required capital resources.