Relationship Between Proper Capital Structure and Financial Sustainability of A Company

DISSERTATION PROPOSAL FORM
Business School
BUSINESS MASTERS DISSERTATION PROPOSAL
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Name Student Number
Course
Provisional Title of Your Dissertation.
Relationship Between Proper Capital Structure and Financial Sustainability of A
company
Describe the topic(s) or issue(s) you wish to investigate for your Dissertation.
These must relate to the subjects that comprise your programme of study, and
must clearly indicate what your aims /objectives / research questions will be.

Issues/Topics:
#1Issue:
The first issue to be investigated include the capital structure which shows how a
company funds its overall operations and growth with funds from different sources in a
manner that still makes it sustainable. A good capital structure is the one that is highly
responsive to emergencies. The ability of a financial plan to respond to emergency issues
determines the success of the company. Emergency situations may include revenue
fluctuations, finance availability among others. A capital structure should be able to
contain these emergencies and still service the debts in time. A responsive capital
structure helps the company avoid solvency as a result of an emergency situation.
(DeAngelo and Masulis 1980).
#2Issue:
Another issue is debt to equity ratio which is a financial ratio indicating the relative
proportion of shareholders’ equity and debt used to finance a company’s assets. The
investigation intends to determine the best debt: equity ratio a company needs to stay in
business based on the type of mix up of debt and equity it uses. The focus here is to help
recommend to the management and stakeholders the need to make sound decisions on
what mix to use to avoid insolvency.
#3Issue.
Another issue to be investigated relates to how the management should ensure that the
debts borrowed to finance the company’s operations are long-term debts to ensure
maximum returns from the debts (Scott 1977). The management and stakeholders should
also consider the advantages of raising the capital using either of the ways of raising the
capital, that is equity or debts. The focus here is to give the company the best framework
on how to attain the optimal capital structure.
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Aim:
 The aim of this study is to demonstrate how businesses can ensure financial
sustainability through the adoption of proper capital structure
Objectives:
 To determine how a company can decrease risk of insolvency through adoption of
proper capital structure with optimal debt to equity ratio
 To determine the best debt: equity ratio a company needs to stay in business based
on the type of mix up of debt and equity it uses.
Research Questions:
 How a company can reduce the risk of insolvency by adopting a proper capital
structure with optimal ratio of debt equity.
 How the management can ensure that the debts borrowed to finance the
company’s operations are long-term debts for maximum returns?
What facts or information will you need to gather? How will you access these?
a. Basis of Company Capital Structure
The first information that will be gathered relates to how decisions on the capital
structure should be based on cash flow and not on the income. The cash flow to debt
analysis determines the company’s borrowing capacity. Making decisions on borrowing
capacity of a company by the income of the company involves a lot of risks since the
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