The success of companies and corporations is in their ability to maintain adequate liquidity and achieve satisfactory profitability. Liquidity is measured in terms of factors like current, quick, working rations and so on. Profitability on the other hand is measured by debt to equity ratio, return on assets and return on equity.
The analysis of the capital structure will include the understanding of the debt ratio, and debt to equity ratio Walter and Robert, (2003). The debt to equity ratio shows the part of the company that has been financed by creditors by comparing to that financed by shareholders. This is simply calculated by dividing the total liabilities by stockholders equity.
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