CAPITAL STRUCTURE ULTRATECH

Abstract

Capital structure refers to the mix of long – term sources of funds, such as debentures, long-term debt, preference share capital and equity share capital including reserved and surpluses (i.e. Retained earnings). Some companies do not plan their capital structure, and it develops as a result of the financial decisions taken by the financial manager without any formal planning. These companies may proper in the short-run, but ultimately they may face considerable difficulties in raising funds to finance their activities. With unplanned capital structure, these companies may also fail to economies the use of their funds. Consequently, it is being increasingly realized that a company should plan its capital structure to maximize the use of the funds and to be able to adapt more easily to the changing conditions.
theoretically, the financial manager should plan an optimum capital structure for his company. The optimum capital structure is obtained when the market value per share is maximum.
In practice, the determination of an optimum capital structure is a formidable task, and one has to go beyond the theory. There are significant variation among industries and among individual companies within an industry in terms of capital structure.
since a number of factors influence the capital structure decision of a company, the judgment of the person making the capital structure decision plays a crucial part.