Discuss the significance of capital stru | Class 12 Business Studies Chapter Financial Management, Financial Management NCERT Solutions

Question:

Discuss the significance of capital structure decisions.

Answer:

Capital structure refers to the mix of debt and equity used to finance a company's operations. A well-balanced capital structure is essential as it optimizes risk and return. Using debt in the capital structure can provide a tax advantage due to the deductibility of interest but increases financial risk due to fixed obligations. Equity, while less risky, is more expensive as dividends are not tax-deductible. A company must carefully balance these to ensure profitability and financial stability.


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Welcome to the NCERT Solutions for Class 12 Business Studies - Chapter . This page offers a step-by-step solution to the specific question from Extra Questions, Question 4: Discuss the significance of capital structure decisions.....