Question

In: Finance

The issue of capital structure management: includes an assessment of the appropriate financing mix for the...

The issue of capital structure management:

includes an assessment of the appropriate financing mix for the firm

may include decisions on the types of loans for the firm to undertake

is typically set once for the lifetime of the current company managers

all of the above

includes an assessment of the appropriate financing mix for the firm and is typically set once for the lifetime of the current company managers

includes an assessment of the appropriate financing mix for the firm and may include decisions on the types of loans for the firm to undertake

none of the above

Solutions

Expert Solution

Capital Structure Management is the planning and montoring of the sources of funding for the company. This sourcing of capital can be thru multiples forms like Debt, Equity and other hybrid instruments. Management and regualr monitoring of this structure is key to ensure that the financial leverage is not increasing and to ensure lowest possible cost of capital for the company. Also, the requirements (Working Capital, Long term assets, etc) of the company, shall also determine the choice of socurcing to be considered.

This cannot be a one-time exercise, as the requirements keep on changing and the cost of debt/equity keeps on changing based on different parameters; Hence, a regular monitoring of the capital structure is important.

Of the given choices, the answer is includes an assessment of the appropriate financing mix for the firm and may include decisions on the types of loans for the firm to undertake.


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