Capital Structure of Cement Industries

CHAPTER 1

INTRODUCTION

1.1 Background

The main theme of capital structure is the reasoning that it is the blend of two main financial variables which are liabilities that includes debt and the second one is also a kind of liability retained earnings or equity. These are the main variables that are involved in the asset financing of an organization. The major decision that is made in finance is about the capital structure. There are many theories about capital structure. Except of those theories there is the major part in corporate finance is the judgment about it. The determinants of capital structure include policies that are related to dividend, securities and the financing of projects etc. One of the purposes of the finance executive is to make sure the maximization of the wealth of shareholders by lowering the cost of capital. That is why it is said to be the operational gears for the finance department i.e. the financial management system to control the total cost of capital. We can get the best of capital structure when there is a decrease in total cost of the capital.

If the company is supporting finance to the company’s asset and its growth in the capital structure then it is being done by giving earning equity, liabilities like debt and securities. On the other side of the picture the major theme of financing is basically the route by which the company’s gather money by the help of its sources that are involved in getting and maintaining the company’s total amount of assets and the company growth and present operations in the field. Moreover, Equity in the company comes by dispensing all the company’s stocks and equity or retained earnings. Beside these sources of finance, company’s issue securities that own the distinctiveness of both equity and debt such as income bond also called as hybrid securities.

A company can choose its financing mix decision so that it can use in the company’s assets and it will lead to value maximization. The...