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Financial Management

Notes 8. Explain the approach which pronounced that the overall capitalization rate and the cost of
debt remain constant for all degrees of leverage.
9. Critically analyze the different theories of capital structure.
10. Comment on the flexibility in the capital structure.

Answers: Self Assessment
1. long-term 2. Optimum 3. cost of financing
4. financial 5. control 6. expected earnings

7. debt holders 8. shareholders 9. EBIT
10. cost of capital 11. arbitrage process 12. NI
13. Earnings Per Share (EPS) 14. operating 15. stable income

7.9 Further Readings

Books Dr Pradeep Kumar Sinha, Financial Management, New Delhi, Excel Books, 2009.
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.
Chandra, P., Financial Management - Theory and Practice, New Delhi, Tata McGraw
Hill Publishing Company Ltd., 2002, p. 3.

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