FUNCTIONS OF MERCHANT BANKERS TOWARDS CAPITAL ISSUE MANAGEMENT

FUNCTIONS
DESIGNING CAPITAL STRUCTURE CAPITAL MARKET INSTRUMENTS PREPARATION OF PROSPECTUS SELECTION OF BANKERS ADVERTISING CONSULTANTS SELECTION OF REGISTRAR TO THE ISSUE ARRANGING FOR UNDERWRITING BROKERS TO THE ISSUE

DESIGNING CAPITAL STRUCTURE

Combination of debt and equity An ideal mix of long term commitment of funds that aims at minimizing overall cost of capital of the firm and maximizes the market value of the shares of the firm is called as Optimum Capital Strucutre

Features of optimum capital structure

Simplicity Low cost Maximum returns and minimum risk Maximum control Liquidity Flexibility Equitable capitalization Optimum leverage

Patterns of capital structure

Equity , preference share, debt and retained earnings Equity only Debt only Equity and debt

Principles of capital structure

Cost principle Control principle Return principle Flexibility principle Timing principle

Factors affecting capital structure decisions

Business activity Stock market Taxation Regulations Credit policy Financial institutions