Posted on : February 17, 2017
Views : 2
Category : Finance
What is a ‘Capital Structure’. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.
  • BREAKING DOWN ‘Capital Structure’
A firm’s capital structure can be a mixture of long-term debt, short-term debt, common equity and preferred equity. A company’s proportion of short- and long-term debt is considered when analyzing capital structure. When analysts refer to capital structure, they are most likely referring to a firm’s debt-to-equity (D/E) ratio, which provides insight into how risky a company is. Usually, a company that is heavily financed by debt has a more aggressive capital structure and therefore poses greater risk to investors. This risk, however, may be the primary source of the firm’s growth. source:
  • Financial Management 1/7
  • Financial Management 2/7
  • Financial Management 3/7
  • Financial Management 4/7
  • Financial Management 5/7
  • Financial Management 6/7
  • Financial Management 7/7