




































Indian Journal of Finance and Banking; Vol. 2, No. 2; 2018 

                                                           ISSN 2574-6081  E-ISSN 2574-609X 

Impact Factor: 3.8 

 Published by Centre for Research on Islamic Banking & Finance and Business, USA 

 

42 
 

A Study on Evaluation of Capital Structure 
 

 

G.D.V. Kusuma
1 

 

 
1
Department of MBA-Sree Kavitha Institute of Management, India. 

Correspondence: Dr. G.D.V. Kusuma, Department of MBA-Sree Kavitha Institute of Management, India. 

 

 

Received: October 20, 2018            Accepted:  October 28, 2018           Online Published: November 2, 2018  

 

 

 

Abstract 

Capital is the back bone of any organization. Everyone should utilize the capital in a proper way; otherwise their 

business will be washed away from the market. The present paper is an attempt to present the capital structure of My 

Home Industries Ltd. In this paper the researcher/s made an attempt to evaluate the capital structure by considering 

different elements like debt and equity.  

 

Keywords: Capital, Debt, Evaluation, Equity, Structure, My Home Industries Ltd., Hyderabad. 

 

1. Introduction 

The financial decisions taken by the management of the companies is highly important while determining the 

optimal capital structure. It is responsibility of the management to design their capital structure in a way to 

maximize their firm value. However, firms have a different level of leverage and managers try to achieve the best set 

to attain an optimal capital structure. MM (1958) argues that under very restrictive assumptions of perfect capital 

markets, investor’s homogenous expectations, tax free economy and no transaction cost, capital structure is 

irrelevant in determining firm value. The present paper is arranged as follows. The next session presents the 

methodology of the study, and the last session projects the empirical results of the analysis, findings and suggestions 

that are based on the results of the study. 

Primary Data: Primary data is data that has not been previously published, i.e., the data is derived from a new or 

original research study and collected at the source.  

Secondary Data: This type of data is generally taken from newspapers, magazines, bulletins, reports, journals etc. 

The present study is entirely based on secondary data i.e. financial reports of the company. 

2. Objectives of the Study 

 To study different sources of finance available to the firm for its operations.  

 To Study the EPS under different years i.e. from 2010-11 to 2014-15.  

 To measure the liquidity of the firm through ratios  

 To project how to take account of a firm’s financing mix in evaluating investment decisions  

 

3. Results and Discussion 

 

Table -1 Capital Structure of My Home Industries Limited (Rs. in Lakhs) 

 

Particulars  2010-11  2011-12  2012-13  2013-14  2014-15  

I. Authorized capital   

Equity shares  550  550  550  550  550  

II. Issued sharers  550  550  550  550  550  

III. Reserves &surplus  



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1.share premium  1487.5  1487.5  1487.5  1487.5  1487.5  

2.capital reserve  48.18  48.18  48.18  48.18  48.18  

3.capital investment 

subsidy  

30  30  30  30  30  

4.General reserve  6059.7  4848.93  5848.93  5998.93  6228.93  

 

The above table illustrates about the capital structure of the company from 2010-11 to 2014-15. The Equity shares of 

the company are constant during the entire period of the study i.e. (Rs. 550 Lakhs), from 2010 – 2015, apart from 

that the capital reserves of the company are also consistent during the study period. The company is maintaining its 

reserves &surplus from 2010-2015 including share premium and Capital reserves. The company’s general reserve is 

changing from year to year and the highest GR shows in the financial year 2014-15 i.e. Rs. 6228.93Lakhs. 

 

Table – 2 Debt Capital of the Company (Rs. In Lakhs) 

 

Loans & Funds  2010-11  2011-12  2012-13  2013-14  2014-15  

I. Secured Loans   

A. Term loans & W.C. borrowing from Bank  7996.6  8228.6  10280  13077  15284  

II. Unsecured Loans  2283.4  2093.3  1432.1  4047.5  877.7  

 

From the above data it is evident that the company’s secured loans are increasing continuously during the period of 

the study i.e. from 2010-15. It also projects that the unsecured loans are not consistent during the years 2010-15. 

These unsecured loans are changing from year to year. During the years 2013-15, the values of secured loans are 

very high (i.e. Rs.13077 Lakhs & Rs. 15284). Where as the unsecured loans are showing extremely high during the 

year 2013-14 i.e. Rs. 4047.5 

 

Table – 3 Growths of Owners Funds (Rs. In Lakhs) 

 

Years  Equity share capital  Reserve & surplus  Net worth  

2010-11  550  7685  8235  

2011-12  550  6470  7020  

2012-13  550  7559  8109  

2013-14  550  8353  8903  

2014-15  550  9225  9775  

2010-11  550  7685  8235  

 

The above represents the growths of owner’s funds for the years 2010-15. The company’s equity share capital is 

constant during the entire period of the study i.e. 2010-11 to 2014-15. It is observed from the above data that the net 

worth of the company is gradually increasing from 2011-15 (i.e. from Rs. 7020 to Rs. 977 Lakhs), which indicates 

the good performance of the company. This indicates the earnings and savings potentiality of the company, and the 

company is suggested to maintain the same in the future. 

 

Table – 4 Growth Of Debt Capital (Rs. In Lakhs) 

 

Year  Secured loans  Unsecured loans  Total debt  

2010-11  7996.55  2283.43  10279.98  

2011-12  8228.56  2093.25  10321.81  

2012-13  10280.35  1432.13  11712.4  

2013-14  13077.04  4047.47  17124.51  

2014-15  15284.48  877.71  16162.19  

 

The above table represents the growth of debt capital of the company. The company’s debt capital is increased 

during the period of the study. It is not a good sign to the company because it increases the company’s risk. This 

shows that the liquidity position of the company is not in a good position and hence the company has to reduce its 

debt capital in order to maintain the desirable norm of current ratio i.e. 2:1 



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Table- 5 Debt Equity Ratios (Rs. In Lakhs) 

 

Years  Debt  Equity (net worth)  Ratio  

2010-11  10279.98  8234.64  1.24838  

2011-12  10321.81  7020.11  1.47032  

2012-13  11712.48  8108.72  1.44443  

2013-14  17124.51  8903.24  1.92340  

2014-15  16162.19  8775.21  1.65340  

 

 

It is clear from the above depicted graph that debt equity ratio of the net worth was approximately 1.24 times in the 

year 2012. And it is increased to 1.92 times in the year 2013-14 and suddenly decreased 1.65 in the year 2014-15. 

From this it is clear that debt equity ratio is not consistent and it is in unpredictable manner. 

 

Table – 6 Interest Coverage Ratio (Rs. In Lakhs) 

 

Year  EBIT  INT  I.C.R  

2010-11  3352.86  1118.37  2.998  

2011-12  3385.02  1038.45  3.260  

2012-13  4240.58  896.83  4.728  

2013-14  4185.45  1082.33  3.867  

2014-15  4269.01  1159.13  3.683  

 

The above information projects the interest coverage ratio of the company. Interest coverage ratio has been 

calculated for the years 2010-11 to 2014-15. The calculated ICR is very low from the starting year i.e. 2011-12 

(2.998 lakhs), it is increased in the year 2012-13 (4.728 Lakhs), and in the years 2013- 14 and 2014-15 it was 

decreased (3.683 lakhs). 

 

Table – 7 Return On Networth (Rs. In Lakhs) 

 

Years  Net profit  Net worth  R.O.N  %  

2010-11  781.47  8234.64  0.09  9  

2011-12  888.74  7020.11  0.13  13  

2012-13  1398.84  8108.72  0.17  17  

2013-14  1042.71  8903.24  0.12  12  

2014-15  1122.61  9775.15  0.11  11  

 

The above chart illustrates the net worth position of the company for the years 2010-11 to 2014-15. Here Net profit 

& Net worth bas been taken for calculating the RON. During the period of the study the RON is in fluctuating 

manner and is lowest in the year 2010-11 i.e. 9% and it is highest in the year 2012-13 i.e. 17%. 

 

Table – 8 Earning Per Share (Rs. In Lakhs) 

 

Years  Net profit  No of shares  E.P.S  %  

2010-11  781.47  55,00,000  142.09  14.21  

2011-12  888.74  55,00,000  161.59  16.16  

2012-13  1398.84  55,00,000  254.33  25.43  

2013-14  1042.71  55,00,000  189.58  18.96  

2014-15  1122.61  55,00,000  204.01  20.04  

 



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From the above table it is observed that Net worth earnings per share in the year 2010-11 is (142.09), it is increased 

in the year 2012-13 (254.33), finally it decreased in the year 2013-14 (204.1) and there is a slight increase in the 

year 2014-15. 

4. Findings 

 Debt equity ratio reveals that the company employed more amount of debt for raising the funds. The debt 

equity ratio was approximately 1.24 times and increased to 1.92 times in the year 2014-15 which is not a 

good sign to the company.  

 The interest coverage ratio in the year 2010-11 is 2.99 indicating that the firm has very low debt servicing 

capacity. The interest coverage ratio is high in the year 2012-2013 and indicates that the firm has sufficient 

earning to cover the interest charges. Company’s ability to service the debt has increased over the period of 

study.  

 The return on net worth is high in the year 2011-13 by 17% indicating that the firm earned greater returns 

on their investment.  

 The company’s turnover position is gradually increasing every year from 2010-11 to 2014-15.  

 The net profit of the firm is growing during the period of the study and indicates the good operational 

efficiency of the firm.  

 The net worth of the firm is in increasing manner for the years 2010-2013, and it is in fluctuating manner 

from 2013 -2014 onwards.  

5. Suggestions 

 The company has to maintain the optimal capital structure so that it can contribute to the wealth of the 

shareholders in the coming years.  

 My Home Industries should exercise more to control over its outside purchases and overheads which have 

effect on the profitability of the Company.  

 The company is advised to increase its profitability in order to meet various expenses.  

 My Home Industries Ltd., reserves are increasing every year. Therefore proper utilization of these reserves 

should be done by the management of the Company, by giving bonus shares to the existing shareholders 

etc.  

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