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Abstract
The capacity of a firm to operate its activities is based on the availability of funds. Normally, these funds in finance literature are termed as long term funds, which are contributed by owners (shareholders) and outsiders. The owners‘funds are represented by equity contributions and internally generated financial resources. A unique characteristic of procuring funds is that a firm may tap any of these sources and hence the blend of these different sources of long term funds is termed as capital structure in finance literature. Capital structure ordinarily implies the proportion of debt and equity in the total capital of a firm. In the term, capital structure,‘ capital refers to long term funds and structure refers to the proportion of debt and equity in capital. Further, capital is easily comprehended through accounting as the difference between total assets and current liabilities, and this residual difference is always represented by debt and equity.