The investment project of an organisation can be financed by increasing the owner or creditors claim. the owner plane when the business firm raises fund by issuing common share or by retaining the earning, that credit claims increases by borrowing. the various means of Financing represent the financial structure of an enterprise. the term capital structure is used to represent the proportionate relationship between debt and equity. equity consist paid up share capital ( preference share capital or equity share capital) share premium and reserve and surplus.
capital structure refer to the permanent financing of the company represented by owned capital ( equity ) and term or debt capital (Debt). in other words, capital structure include all long term funds invested in the business in the form of long term loans. preference share debenture including, equity capital and Reserves.
capital structure means the pattern of capital employed in the firm. it is a financial plan of the firm in which the various source of capital are mixed in such proportions that those provide additional capital structure most suitable for the requirement of the firm.
Capital structure=long term funds
Or
Equity share capital +preference share capital +Reserves and Surplus +long term loans
