BASIC STANDARD FOR A COMPANY'S CAPITAL STRUCTURE.PART 1

Stock market investors often look for an ideal platform to invest and basically prefer companies with good fundamentals.In this context,we refer to companies with good balance sheet,a vital requirement for investment in a company's stock.Generally speaking,a company's balance sheet by its measurement in terms of strength,quality and health can be evaluated bythree standard criteria: working capital adequacy,assetquality and performanceand capital structure.We shall be looking at the basic standard for the composition of a company's capital structure in this essay.A company's basic capitalisationthough differs from stockmarket capitalisation defines a company's long term capitalcomposition that is an admixtureof debt and equity.To indicate a healthy proportion according to my management consultant,thegearing ratio should be moderate or that the proportion of debt to equity should be in the ratio of 1:4.That is a healthy ratio of equity capital in contrast to debt capital,extant in a company'capital structure