ASHOGBON, Mustapha Babatunde A.
Department of banking and finance
Lagos State University of Science and Technology, Ikorodu,
Lagos State, Nigeria.
This work looked at the relevance of the concept of Capital Structure and its contribution in
developing good financial policy for a business organisation. The paper briefly look at early and
recent theories of capital structure and see how those theories and their assumptions can be of
help to management of companies in taking good decision which will lead to their expansion.
Some of the theories examined are Modigliani & Miller, Pecking order theory, Traditional
approach, Net income approach, Net operating income approach as well as Market Timing
theory. It was recommended that good understanding of the concept of capital structure and
relevant theories will aid management in taking good capital structure decision.
Keywords: Capital structure, theories, companies, total value, overall cost of capital.