Capital Structure for Industries

Running head: CAPITAL STRUCTURE FOR INDUSTRIES
Capital Structure for Industries
Name of the Student
Name of the University
Author Note

1CAPITAL STRUCTURE FOR INDUSTRIES
Table of Contents
The concept of capital structure.................................................................................................2
Explanation of the two commonly types of fund, the interest paid and the associated cost for
each............................................................................................................................................2
The various risks involved in the different capital structure and its aversion............................3
The advantages and disadvantages of capital financing............................................................3
References..................................................................................................................................6

2CAPITAL STRUCTURE FOR INDUSTRIES
The concept of capital structure in for every industry in Saudi stock exchange market
Capital structure deals with the amount of the equity or debts that is used by the
organization to fund for its activities and to finance its assets. In the Saudi stock exchange the
capital structure is generally represented as the debt capital or debt to equity ratio. The capital
structure of debt and equity are utilized in the business for acquisitions, expenditures and to
make other investments. The objective of the manager of the firm in the Saudi stock
exchange is to balance between the two capital structure by deciding whether to raise equity
or debt and obtain the optimum structure of capital. It can be said that the profitability and
risk are the chief factors in the determination the structure of capital decision for listed
entities in Saudi Arabia.
Explanation of the two commonly types of fund, the interest paid and the associated cost
for each
Market of equity and bond
The Bond market development in the country of Saudi Arabia can find its origin back
to the mid-1988, when the securities of the government have been issued in the domestic
market to finance the fiscal deficits of the government. However, the market was still
stagnant until the time 2009 when the Capital Market Authority (CMA) approved the trade of
Sukuk (Islamic bond) and traditional bonds for the first time in Saudi Arabia. The Bond and
eequity financing helps to raise of funds by the issue the shares of equity, or stocks, on
securities exchanges1. A shareholder is also known as the stockholder who receives the
payments of dividend that are regular and earns revenue when there is a rise in the share.
Debt Financing
1 Parlińska, Agnieszka, and Hasan Bilgehan Yavuz. "Finances of Municipalities Governments in Poland and
Turkey." Acta Scientiarum Polonorum. Oeconomia 16.4 (2017).