CAPITAL STRUCTURE

Capital Structure means a combination of all long-term sources of finance.It includes equity share capital,loans,debentures and other such long-term sources of finance.

Capital Structure is the combination of debts and equity securities that comprises a firm's financing of its assets.

The term capital structure is frequently used to indicate the long-term sources of fund employed in a business enterprises.

FACTORS OF CAPITAL STRUCTURE

1 - INTERNAL FACTORS

a)- NATURE OF BUSINESS - Every business concern has its own capital structure.Large manufacturing industries need heavy fixed assets therefore these industries collect their finance through issue of debentures and raising of long-term debts.

b)- NATURE OF INCOME - Capital Structure is also affected by regularity and certainty of income.Debentures may be issued or long-term debts may be raised if there is a certainty or regularity of income.

c)- DESIRE TO CONTROL BUSINESS - If the promoters and founders of a company want to control the business then equity shares are issued and large number of these shares is held by a group of some people who want to control the business.

d)- POLICIES OF MANAGEMENT - The nature of capital structure also depends on the financial policies of management.

2 - EXTERNAL FACTORS

a)- COST OF CAPITAL - Cost of capital should also be kept in mind while determining the capital structure of a business.Capital Structure should be of such type which creates minimum average cost of capital of different sources.

b)- CHOICE OF INVESTORS - Nature and type of investors should also be considered at the time of framing capital structure.

c)- CONDITIONS OF CAPITAL MARKET - Capital Market condition have significant influence over capital structure.During depression period interest rates fall and profit earning capacity become uncertain and irregular,so in such conditions debentures are more popular.

d)- RULES AND REGULATIONS - Rules and Regulations also affect the nature of capital structure.Under income tax rules dividend paid on shares is not considered as business expenditure,while interest paid on debentures is considered as business expenditures.

THEORIES OF CAPITAL STRUCTURE

1 - NET INCOME APPROACH -

This approach being propounded by Durand State that there is a relationship between the value of the company and its cost of capital,i.e.,the value of company is dependent on the capital structure of the company.The change in capital structure via cost of capital results into change in the value of company.

According to this approach,the increase in the proportion of debt in the capital structure of the company brings decrease in the overall cost of capital because debt is a cheapest source of finance.

2 - NET OPERATING INCOME APPROACH -

This approach is entirely opposite to the net income approach and this approach was also given by Durand.This approach suggests that there is no relationship between capital structure and value of the company.In other words,the value of the company is independent of capital structure of the company.

3 - MODIGLIANI-MILLER APPROACH -

It recognize the irrelevance of the capital structure and thus is akin to net operating income approach.It supports the net operating income approach relating to the independence of cost of capital and the degree of leverage.However,the methodology used by the MM approach significantly differ from net operating income approach .

MM approach used arbitrage method to justify the crux of its argument.MM approach maintain that the weighted average cost of capital remains constant even with a change in the proportion of debt to equity in the capital structure.

4 - TRADITIONAL APPROACH -

This approach takes an intermediate view between net income approach and net operating income approach.As such the increase in debt capital in capital structure does causes a decrease in overall cost of capital and thus the value of company increases.The shareholders are also indifferent to risk perception.But after a certain stage if further debt capital is added to the capital structure,the risk perception of the shareholder changes.

CONCLUSION

Capital Structure continues to be the backbone and financial foundation for any organization.Certainly the Modigliani and Miller's capital structure theory is not the most accurate,but it helped in the development,understanding and learning of capital structure.

INTERNET MARKETING

Internet Marketing refers to advertising and marketing efforts that use the web and email to drive sales via electronic commerce in addition to sales leads from websites or emails.

o Internet Marketing is very economical very fast way to promote product.

o Internet Marketing is very useful for promoting product globally.

o Internet Marketing through online business one can sell or buy product 24*7.

TYPES OF INTERNET MARKETING

1-WEB MARKETING - Web Marketing includes e-commerce web sites,affiliate web sites,promotional or informative web sites,online advertising on search engines,and organic search engines results via search engines optimization.

2-EMAIL MARKETING - Email Marketing involves both advertising and promotional marketing efforts via email messages to current and prospective customers.

3-SOCIAL MEDIA MARKETING - Social Media Marketing involves both advertising and marketing efforts via social networking sites like Facebook,Twitter,Youtube and Digg.

4-SEARCH ENGINE OPTIMIZATION - Search Engine Optimization involves the optimization of landing pages within your websites to increase the number of visits.

ELEMENTS OF INTERNET MARKETING

1-CREATING CONTENT - Creating an informative and an engaging content is very necessary in internet marketing.Blogging,ads,eBooks,videos are some of the popular forms that is presently adapted to grip the attention of the viewers.

2-OPTIMIZATION - Along with a good content,proper formatting and adding useful keywords that results in boosting up the rank in search result is very important.

3-PROMOTION - The third and useful step in internet marketing is judicious use of social media for publicizing the content.

4-ANALYZE - Analyzing your input in the work is another key factor in internet marketing.It helps to discover the result of your effort and creativity.

ADVANTAGES

1-ABILITY TO SELL ANYTIME ONLINE - The mode of operation is influenced and conducted by the electronic processes ,anything can be sold online.

2-ABILITY TO COLLECT PAYMENT ONLINE - The help of internet marketing the payment can be collected online.This requires less time and complications.

3-DIRECT DELIVERY OF PRODUCT - Internet Marketing helps to deliver your products directly to your customers without having to use a courier or any other transport services.

4-LESS COST OF SPREADING - The cost of spreading your message is next to nothing.Internet Marketing your subscription base is more often cheaper than sending a letter through the mail.

5-LESS TIME CONSUMING - So many business models on the internet marketing is available which takes less time and smooth functioning.

DISADVANTAGES

1-INTERNET MARKETING IS NOT FREE - The cost of software,hardware,websites,design,maintenance of your sites,online distribution cost and of course,time all must be factored into the cost of providing your serice or product.

2-LOTS OF COMPETITION - By the time your visitor finds you,they have already been clicking many links.

3-IS YOUR SITE SECURE? - There are many incorrect stereotypes about the security of the internet out there.As a result,many of your visitors will not want to use their credit card to make a purchase.

4-OVER 50% OF HOUSEHOLD SHOP ONLINE - That number will continue to grow,you are reaching less than two out of there households.

CONCLUSION

Online Marketing,especially search engine marketing will continue growing in double digits in the next few years.At the same time there are an increasing number of household using the internet and search engines.

Anand Guide