Identify the factor which affects Capital structure of a company.

Interest Coverage Ratio

The correct answer is Option (4)- Interest Coverage Ratio.

Interest Coverage Ratio affects Capital structure of a company.

The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation.
This may be calculated as follows: ICR = EBIT/ Interest.
The higher the ratio, lower shall be the risk of company failing to meet its interest payment obligations. However, this ratio is not an adequate measure. A firm may have a high EBIT but low cash balance. Apart from interest, repayment obligations are also relevant.