Capital structure and financial sustainability PDF

Running head: CAPITAL STRUCTURE AND FINANCIAL SUSTAINABILITY
Relationship between Proper Capital Structure and Financial Sustainability of a Company: A
Study on Ooredoo Oman
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1CAPITAL STRUCTURE AND FINANCIAL SUSTAINABILITY
Table of Contents
Chapter 1: Introduction..............................................................................................................2
1.1 Background of the study:.................................................................................................2
1.1.1 Capital structure:.......................................................................................................2
1.1.2 Financial sustainability:............................................................................................3
1.1.3 Capital structure and financial sustainability:...........................................................4
1.1.4 Ooredoo Oman:.........................................................................................................4
1.2 Research problem:............................................................................................................5
1.3 Research aim:...................................................................................................................6
1.4 Research objectives:.........................................................................................................6
1.5 Research questions:..........................................................................................................6
1.6 Significance of the study:.................................................................................................6
1.7 Summary:.........................................................................................................................7
References:.................................................................................................................................8

2CAPITAL STRUCTURE AND FINANCIAL SUSTAINABILITY
Chapter 1: Introduction
1.1 Background of the study:
The basic resource of an organisation is the stream of cash flows generated by its
assets. When the organisation is financed completely by common stock, all such cash flows
are associated with the shareholders. At the time debt and equity securities are issued, the
cash flows are split up into tow streams, a safe stream going to the debt holders and a risky
one going to the shareholders (Das and Swain 2018). Capital structure denotes the way where
an organisation is funded a mix of short-term liabilities like trade creditors and long-term
capital like ordinary shares and reserves. Therefore, the capital structure of an organisation is
the composition of its liabilities.
The capital structure or financing decision is an important managerial decision, since
it affects the risk and return of the shareholders. The capital structure decision has impact on
the share market as well. It is necessary for the organisation to maintain its capital structure
firstly at the time of promotion. Consequently, whether the funds need to be raised, a capital
structure decision is involved. When funds need to be raised, a new capital structure is
generated requiring critical analysis.
1.1.1 Capital structure:
According to Githire and Muturi (2015), capital structure of an organisation is
described as the components of the funding sources categorised in the form of debt and
equity finance. Equity finance is that fund that the business owners have provided and it is
risk bearing fund. The equity fund holders own a portion of the organisation represented in
shares and they are entitled to a portion of business profit, which is termed as dividend.