Enterprise capital - Definition, theory and determinants of the structure

Abstract

Purpose of the study: The main goal of the article is to define the company's capital, the concept of which in the literature is insignificant and broad. The subject of the research is also the characteristics of the capital structure and the factors that determine it.
 Methodology: The main research method was a critical review of the literature in the field of shaping the capital structure of enterprises, also in the perspective of the evolution of the theory of the optimal capital structure and the factors determining it.
 Main findings: The most common definition of capital describes this concept as a source of financing for the activities of an enterprise, and therefore equates it with the balance sheet concept of liabilities. The sources of origin of funds financing business activities forces the managers to search for their optimal structure ensuring the proper relationship between the planned profit and the acceptable level of risk. The literature presents many theories of capital structure and factors shaping it. When shaping the share of equity and borrowed capital in the total of liabilities, one should take into account the business sector of the enterprise, its environment and the risk appetite of the managers.
 Application of the study: The presented attempt to define the company's capital is in line with the considerations on this subject so far and aims to standardize this concept in the literature. The cross-section of the theory of capital structure allows for a historical approach to this issue and confirmation of the multidimensionality of the presented issues. The presented factors shaping the capital structure of enterprises specify the areas on which managers should focus when looking for an optimal relationship of equity and foreign capital.
 Originality/Novelty of the study: The issue of defining capital and its optimal structure is not new in the literature. However, it requires permanent analysis, which is conditioned by the volatility of macroeconomic and microeconomic conditions. Difficulties in a universal approach to this subject also force detailed research in specific industries and economic conditions.