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B Com Exam  >  B Com Tests  >  Test: Capital Structure - B Com MCQ

Test: Capital Structure - B Com MCQ


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10 Questions MCQ Test - Test: Capital Structure

Test: Capital Structure for B Com 2024 is part of B Com preparation. The Test: Capital Structure questions and answers have been prepared according to the B Com exam syllabus.The Test: Capital Structure MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Capital Structure below.
Solutions of Test: Capital Structure questions in English are available as part of our course for B Com & Test: Capital Structure solutions in Hindi for B Com course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Capital Structure | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study for B Com Exam | Download free PDF with solutions
Test: Capital Structure - Question 1
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Capital structure refers to the __________ and __________ that make up capitalization.

Detailed Solution for Test: Capital Structure - Question 1
Capital structure refers to the kinds of securities and the proportionate amounts that make up capitalization. This means that it involves determining the types of financial instruments used to raise capital and the relative proportions in which they are used.
Test: Capital Structure - Question 2
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The financial structure of a company includes both __________ and __________ sources of funds.

Detailed Solution for Test: Capital Structure - Question 2
The financial structure of a company includes both long-term and short-term sources of funds. This means that the company considers both its long-term and short-term financing options when determining its financial structure.
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Test: Capital Structure - Question 3
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What is the optimum capital structure?

Detailed Solution for Test: Capital Structure - Question 3
The optimum capital structure is the capital structure at which the weighted average cost of capital is minimum and the value of the firm is maximum. This means that the company aims to find the balance between debt and equity financing that minimizes its overall cost of capital and maximizes its value.
Test: Capital Structure - Question 4
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What is the difference between financial structure and capital structure?
Detailed Solution for Test: Capital Structure - Question 4
The main difference between financial structure and capital structure is that financial structure refers to the composition of a firm's financing, including both long-term and short-term sources, while capital structure refers to the relationship between the various long-term source financing. Financial structure is important in determining the value of the firm, as it includes all sources of capital, while capital structure consists of only long-term debt and equity.
Test: Capital Structure - Question 5
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The main objective of capital structure decision is to __________.
Detailed Solution for Test: Capital Structure - Question 5
The main objective of capital structure decision is to maximize the value of the firm. This means that the company aims to structure its capital in a way that maximizes its overall worth and increases the value for its shareholders.
Test: Capital Structure - Question 6
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What are the two main forms of capital in a capital structure?
Detailed Solution for Test: Capital Structure - Question 6
The two main forms of capital in a capital structure are equity capital and debt capital. Equity capital refers to the money invested by the shareholders, while debt capital refers to borrowed money used by the company. These two forms of capital have different characteristics and costs associated with them.
Test: Capital Structure - Question 7
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What is the advantage of debt capital in a company's capital structure?
Detailed Solution for Test: Capital Structure - Question 7
The advantage of debt capital in a company's capital structure is that it is cheaper than equity capital. This is because the interest payments on debt are tax-deductible expenses, making the cost of debt financing lower compared to the cost of equity financing. This can result in lower overall financing costs for the company.
Test: Capital Structure - Question 8
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What is vendor financing?
Detailed Solution for Test: Capital Structure - Question 8
Vendor financing refers to financing obtained through the sale of goods before payment to the vendor. This means that the company can generate capital by selling its products or services and using the proceeds to fund its operations. This form of financing can be advantageous as it does not require an upfront payment and can help improve the company's return on equity.
Test: Capital Structure - Question 9
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What is policy holder float financing?
Detailed Solution for Test: Capital Structure - Question 9
Policy holder float financing refers to financing obtained through the investment of policyholder premiums until claims are paid. This applies to insurance companies, where the premiums collected from policyholders are invested by the company until they are needed to pay out claims. This can provide the company with additional funds to earn returns on investments before they are required to be paid out.
Test: Capital Structure - Question 10
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What is the significance of the cost of capital in determining the capital structure?
Detailed Solution for Test: Capital Structure - Question 10
The cost of capital is significant in determining the capital structure as it affects the value of the firm. The cost of capital is the rate of return required by investors to invest in the company, and it is influenced by the types of securities used in the capital structure. By finding the optimal balance between debt and equity financing, the company can minimize its overall cost of capital and maximize its value. Therefore, the cost of capital plays a crucial role in determining the capital structure.
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Important Questions for Capital Structure

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