What is the connection between the capital structure and the fixed value?
The connection between the capital structure and the fixed value comes from former financial activities that increase others. The capital structure is a combination of operating funds, debt financing and its own capital, which pays for new projects or activities that increase the income and economic wealth of the company. For example, starting a new product line can be very expensive for the company; However, using external funds and the efficient production process, however, this can be done correctly. The company's capital structure and the value of the company can be one of the most researched parts of the balance sheet. This is true because those who lend money to the company through debt or capital financing want to ensure that they receive a corresponding financial reward for the investment. The result is the actual economic value that the company generates through business activities. Capital and company structure have a connection with physical assets in the balance sheet because these items are usually the result of a financial setEdky from external sources. In some cases, the total commitments of the company are higher than the total assets listed in the balance sheet. The final result is a negative overall economic value due to inefficient financial processes resulting from business activities.
There are two different financial conditions for measuring the connection between the company's capital structure and the fixed value: the return on debt and the return on equity. Each formula focuses on a specific type of external funds that can be used in paying large projects or business activities. Each formula has a net income or net profit as a numerator; The denominator is either a total long -term debt or total capital, depending on the type of external funds used. The result is a percentage, with higher percentage, which means that society makes more money for funds and is therefore more efficient. Creating a combined vzoRCE to measure the use of both types of funds for the project is also possible through slight changes in calculations.
Not all companies have a connection between capital structure and fixed value. An obvious problem is the lack of capital financing that can exist in business. Therefore, no capital structure is equal to zero need to measure the value of the company in this way. In addition, smaller companies that do not have the ability to issue shares have only debt in their capital structures. This can cause measuring capital structure and fixed value slightly less important than when shareholders have interests in business.