Capital Structure – What Is It?
Capital Structure is a term that may come up in your Accounting Assignment Help. How do you define it? When you see a balanced scorecard or an enterprise value diagram for a company, do you see a capital structure that seems like it’s falling apart? That’s when you should know what capital structure means.
If you’re reading this article because you’re facing a capital constraint at work, then you should understand the concept of capital. When you’re talking about business capital, the term ‘capital’ comes from the Latin word caput, which means head or upper portion. Capital refers to money, tools, and resources that are used for production, research, and production of output.
Basically, any capital used by a company can be considered capital structure. Let’s look at the things that capital can include, if you’re looking for assistance in your finance assignment help:
The First Capital- Any capital is sometimes called the first capital, because it’s used in the beginning of a project. It includes everything that’s used up so far, from equipment to personnel to raw materials.
The Second Capital- Any capital that’s used up after the beginning of a project. Any capital used after the beginning of a project is called the second capital.
The Third Capital- Anything that’s not used up during the beginning of a project. The third capital is often used to include cash paid out to vendors and interest payments.
The Fourth Capital- Sometimes referred to as the residual capital, it’s a part of the total capital that can’t be removed during a project. When you think about it, it seems odd to call something that has been used up, ‘residual.’
The Fifth Capital- Thisis the biggest of the capital structures. It is the most important in determining a company’s liquidity and the ability to produce the right kind of output.
The Sixth Capital- Any non-cash capital assets are included in this category. That could be accounts receivable, inventory, or any type of tangible asset.
The Eighth Capital- This is the largest of the capital structures. It includes the cost of tangible assets and their cost to the owner of the capital.
The Tenth Capital- This is the last one, and the most difficult to determine. It’s the difference between what a company can afford to pay to its workers and what it can afford to pay to its suppliers.
The Eleventh Capital- This is the difference between what the workers have been paid and what they have been owed. Any property that is paid for by the company but never repaid becomes part of this category.