Capital structure Research Paper Example | Topics and Well Written Essays - 2500 words

Capital structure - Research Paper Exampleure of an government however, the breathing in of debt has several implications to a business, first, debt leads to an organization having to increase the business risk. The enterprises business risk goes up due to its high contribution to the enterprise, in this case, the high contribution of debt such as in woof one leads to the debt holders having a high control of the enterprise. As a result, the organization or investment becomes undefendable for takeover, if the business does not meet the interest payments, as goes into bankruptcy. Secondly, reduces the stake of the enterprise shareholders in that they have to cypher on servicing the debt at the expense of making profits, which a businesss prime objective(Martin & Baker, 2013).In the consideration of debt options, it is important to consider the debt period, in most cases, long-range debts are highly favorable since the organization utilizes the funds for a long period before repay ing the sum value of the bond. Hence, the organization is able to revel a return on the investment and even re-invest the excess funds or paid dividends to justness and other shareholders in the business.Short time range bonds such as option three, four and cardinal negatively affects business shareholders, this is because, the business is forced to source for funds and pay the creditors irrespective of whether it has generated profits or not, the bottom line is that the business has a responsibility to repay the funds within the agreed period. minded(p) the long-term nature of projects, the funding requirement leads to complications, as the return may not be recognise in good time to pay the sum value as per that date. When this situation arises, the business becomes in force(p) for takeover according to the provisions of business law.In the light of these, careful considerations have to be make before the business can settle on certain kinds of financing and the activities u pon which funding is needed. Careful rating can give the