Find out the factors affecting the choice of capital structure from the given list.

A. Interest coverage ratio

B. Debt service coverage Ratio

C. Amount of Earnings

D. Shareholder's Preference

E. Flexibility

Choose the correct answer from the options given below :

A, B and E only

The correct answer is option (4) : A, B and E only

A. Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation.

B. Debt Service Coverage Ratio (DSCR): Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR). The cash profits generated by the operations are compared with the total cash required for the service of the debt and the preference share capital.

E. Flexibility: If a firm uses its debt potential to the full, it loses flexibility to issue further debt. To maintain flexibility, it must maintain some borrowing power to take care of unforeseen circumstances.