ANALYSIS OF ENTERPRISE’S CAPITAL STRUCTURE

Abstract

The study and assessment of enterprise’s financial position and financial stability is an important object
of the financial and business analysis. The methodology for analysis of the financial position outlines the following
stages: 1) analysis of capital structure; 2) analysis of property structure; 3) analysis of enterprise’s liquidity and
solvency.
The question of capital structure and its analysis methodology is important and relevant at all phases and stages of
an enterprise’s business. This is mainly due to the following reasons: 1) the overall structure of the capital reveals
the financial independence or dependence of the enterprise on borrowings; 2) the financial pressure in the course of
the enterprise’s business depends on the short- to long-term liabilities ratio; 3) a number of ratios on the liability side
of the balance sheet are, in their nature, a part of the system of relative indicators for analysis and assessment of the
enterprise’s financial stability; 4) the capital structure, representing the relative shares of separate capital sources
(short- and long-term) for funding of business, defines the property structure of the enterprise; 5) the manner of
funding of assets (fixed and short-term) with the relative capital sources (long- or short-term) shows whether the
enterprise has met or has failed to meet the business funding golden rule.
The object of study in this publication is the enterprise’s capital structure. It is analysed and assessed from two
aspects. Firstly, as a separate object of the analysis, by identifying the strength and direction of direct factors’ impact
on the changes that have occurred in this structure. Secondly, the capital structure is analysed as a factor that affects
the values of other resultant indicators typical for the different aspects of business, for example, return on capital.
The subject of study in this publication is the capital structure and the methodology for its analysis.
The article is aimed at suggesting an approved methodology for analysis of the enterprise’s capital structure. In
order to achieve this objective, the author suggests the following research tasks for solution:
1) analysis of the overall structure of capital;
2) analysis of the equity structure;
3) analysis of the borrowings structure (liabilities);
4) analysis of the impact of the changes in the capital structure on the return on capital – total invested capital,
equity, borrowings and fixed capital.