Considerations Regarding The Role Of Capital In The Financing Decision

Establishing the financing sources exerts, under the conditions of market economy, a significant impact on the development of business activity. In this way it is decided upon the financial structure of the company and measures are taken to ensure its optimal character. Because preserving financial independence and autonomy is a major aspect in the process of choosing financing sources, one can observe the security offered by equity used as financing sources in the operating activity. However, the company cannot use only equity financing because the rational objective is to maximize the entity’s value, and the cost involved in raising capital will be higher than the cost of the existing one.