What type of capital structure should a firm choose and why? Please include capital structure fallacies and their effects on a firm's decision.© BrainMass Inc. brainmass.com October 25, 2018, 8:18 am ad1c9bdddf
Simply put, a firm should choose a capital structure based on the least cost alternative. The capital structure includes:
* Debt --- either bonds or loans
* Equity --- preferred stock and common stock.
Debt carries with it the need to pay ongoing interest, which will represent a cost for the firm in interest payments for the maturity life of the debt.
Preferred stock usually has a provision for paying dividends. While not a ...
Firms attract capital for investment purposes via debt and/or equity. The need is to understand the cost of these funding sources and determine which is the most beneficial for the firm. This discussion provides information to make those decisions.
Capital Structure in Firms: Fallacies and Misconceptions
Why do you think it is important for financial managers to focus on establishing the right capital structure for their firms?View Full Posting Details