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What are the general factors affecting capital structure?
The general factors which are affecting the capital structure are as follows:-
1) Company constitution : In companies capital structure is very important as many companies treat it as a different entity. Private companies considers control factor as important whereas public company finds cost factor more important.
2) Company characteristics : Characteristic of the company which describe its infrastructure as size, age and credit plays pivotal role in deciding the capital structure. Smaller or newly started companies depend more on equity capital as they can do limited bargaining. Large companies or having good credit companies are in the position to get funds from the source of their choice.
3) Stability of Earnings : Fluctuations occurs if the sales and earnings of the company are not stable enough over a period of time. Stable company can take the risk.
4) Attitude of the Management: Attitude plays an important role as if the attitude is conservative then control factor gets the importance and if it is liberal then cost factor gets important.
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