Stakeholder and Pecking Order Hypothesis on Capital Structure

Capital structure, sometimes known as Financial Plan is all about achieving the correct proportion between debt and equity. As it is one of the most controversial issues in finance, there has been much debate on it.
The capital required for private investment while often scarce, can be had from variety of sources. Firms have three main sources of capital, internally generated funds, bank loans and finance raised in capital markets. The resulting mix of debt and equity determines a firm's capital structure. The importance of debt-equity choice depends on how capital structure decisions actually influence the value of the firm and the riskiness of its earnings.