Financial structure is the amount of debt versus equity funding you use in your business. Greater the proportion of borrowings, higher will be the return on equity. Increasing the level of
borrowings has a multiplier effect on your returns. Financial structure comprises of short-term and long-term sources of funds for various activities of the business. The short-term sources are required for the day-to-day operation in the business.
Where as long-term sources are required for setting up of a firm, expansion, diversification, modernization and other similar capital expenditures. The long-terms sources are generally issue of securities, term loans, and internal accruals, supplier’s credit scheme and equipment financing. In addition to these, you will also have the option of funding projects by way of deferred credit, unsecured loans and deposits and venture capital financing.