Impact of Tax on the Choice Finance Essay
The different combination of funds that a firm uses to finance its activities is known as capital structure. Capital can be raised either by using owners’ claim (owner’s savings, issuing ordinary shares or by retaining the earning) or creditors’ claim (borrowings). In other words equity capital structure exists in two forms equity capital and debt capital. Tax affects investors’ and managers’ decision on capital structure choices as it decreases earnings. Graham (2003) states that both personal and corporate tax should […]