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Difference between capital structure, business risk, financial risk

Explain the difference between capital structure, business risk, financial risk and reserve borrowing capacity.

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Capital Structure:

This is a combination of a company's long-term debts, common equity, short-term debts and the preferable equity that is held by the organization. Through the use of diverse finances in the organization, the capital structure that is used by an organization determines the general financing of the operations of the corporation. The capital structure of a corporation impacts on the returns that are obtained by the company from all the shares held. The percentage rate of money that is being utilized in an organization determines the capital structure. This is based on whether it is equity capital or debt capital. It is hence paramount to note that the capital structure of an organization is the composition of the structure of company liability. In the analysis of the capital structure of a corporation, the proportion of the company's short and long term debts are considered. Through the attained figures, the corporation can be able to determine their risk status (Kennon, 2012).

Business Risk:

This is a factor that is deemed to hold the capacity of negatively impacting on the operations ...

Solution Summary

The expert explains the differences between capital structures, business risk, financial risk and reserved borrowing capacity.

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