Discuss the three major components of the capital structure of an enterprise.© BrainMass Inc. brainmass.com June 3, 2020, 11:15 pm ad1c9bdddf
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 ...
The solution discusses the three major components of the capital structure of an enterprise. References are included.