ASSUMPTION OF THE CAPITAL STRUCTURE THEORIES - Accounts and Finance for Managers

  1. There are only two resources in the capital structure viz Debt and Equity share capital
  2. The dividend pay out ration 100% which means that there is no scope for the retained earnings
  3. The life of the firm is perpetual
  4. The total assets of the firm do not change
  5. The total financing remains constant through balancing taking place in between the debt and share capital
  6. No corporate taxes; this was removed later

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