Importance of international capital structure are:
Capital structure is defined as a combination or balance between equity and debt which the business is use to finance its day to day operation, assets and future growth.
Importance:
1. First and important matter of international capital structure is the company have effective overview of all her claims that most of the different players have on the business. The debt owner tight or hold these claims in the manner in lump sum of cash and according to these interest payment and the equity owner hold these claims in the manner of percentage of that firms future profit and depend on its earning.
2. It is easy to understand that how risky is investing in the business. and how the expensing the financing should be. Capital providers provide proportional weighting of different types of fund which were financed to the company.
The risk can identify when working with cash, credit and inventory management is that:
Working with cash is better for organization that gives more beneficiary background to the company. And if company holds more cash than his maximum criteria then the company take less return on the same. If these cash are in bank, the bank can give interest on them.
Credit Management – By the way of credit management, the company are in more and more bad debts which company are in loss after some time. An its usage of funds are restricted.
Inventory Management – Inventory management are those types which the management are trackle all the inventory are in actual received or not. It is loss for the company if goods are not received in actual.
So, this is the risk which identifying when working with cash, credit and inventory management.
References:
Brigham, E. F., & Ehrhardt, M. C. (2017). Financial management: Theory & Practice, (15th ed.). Boston
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