CAPITAL

STRUCTURE
PLANNING
Determinants of capital structure
1. EBIT - EPS Analysis

EBIT (Earnings Before Interest and Taxes) and EPS

(Earnings Per Share) are two important financial
metrics that provide insights into a company's
profitability and financial performance
 2.Risk
Some main factors include the firm's cost of capital,
nature, size, capital markets condition, debt-to-equity
ratio, and ownership. However, these factors might help
to choose an appropriate capital structure for a business,
but checking all the side factors can help adopt more
appropriate and accurate adaption.
 A. Financial risk

Financial risk refers to the likelihood of losing money on

a business or investment decision. Risks associated with
finances can result in capital losses for individuals and
businesses. There are several financial risks, such as
credit, liquidity, and operational risks.
B. N.E.D.C risk

Degree of Leverage The component of

NEDC risk are as follows: (i) The excessive
reliance on equity source leads to the
sacrifice of the opportunity earnings,
higher EP on account of beneficial effect
of financial leverage, (ii) Financial plan
should be compatible with retaining
control.
 Cash flow analysis
Cash flow analysis refers to the evaluation of inflows and
outflows of cash in an organisation obtained from
financing, operating and investing activities. In other
words, we can say that it determines the ways in which
cash is earned by the company.
OPERATING CASH FLOW

Operating cash flow (OCF) is how

much cash a company generated
(or consumed) from its operating
activities during a period
 NON OPERATING CASH FLOW

Non-operating cash flow is comprised of the

cash a company takes in and pays out that
comes from sources other than its day-to-day
operations. Examples of non-operating cash
flow can include taking out a loan, issuing new
stock, and a self-tender defense, among many
others.
 FINANCIAL CASH FLOW
Cash flow financing is a kind of business loan. A
company will commit to using future cash flows as a
means to pay back a loan. Lenders use the
information on a company's cash flow statement,
along with information about a company's accounts
payable and accounts receivable, to project future
cash flows.
THANK YOU