Components of Capital Structure
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Discuss the three major components of the capital structure of an enterprise.
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The solution discusses the three major components of the capital structure of an enterprise. References are included.
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The capital structure of an organization determines how the organization finances its overall operations with the use of different sources of funds. It has three major components: debt equity, common equity, and preferred equity. Usually, the debt equity capital structure includes only "long-term" liabilities. However, smaller companies treat short-term interest-bearing debt as long-term debt and they also include it in the capital structure to estimate the overall cost of capital of the company. Therefore, the "long-term" debt includes the current debt (long-term) and the ...
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