An ideal capital structure should have the following characteristics:
- Simplicity: It becomes easy to administer capital structure, if lesser varieties of securities are issued.
- Profitability: The capital structure should be planned in such a way that profit remains optimum.
- Adequate finance: Various sources should be combined properly so that adequate finance can be obtained.
- Flexibility: Capital structure of the company should be flexible so that it can be changed as per the requirements and circumstances.
- Economy: Various sources should be combined in a manner that optimizes the cost of capital.
- Balancing: There should be a proper equilibrium between owner’s capital and borrowed capital.
- Liquidity: The capital structure should be so designed that few sources can be liquidated when needed so as to set-off the liability and debts of the company in time.
- Attractiveness (Impressive): Capital structure should be designed in such a manner that investors find it impressive. An impressed investor will stay loyal to the company and even invest more.
- Solvency: The proportion of borrowed capital should not be so large that burden of interest cannot be borne by the company and risk of insolvency increases.
