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What is meant by capital structure?

What is meant by capital structure?

What metrics can be used to assess improvement or deterioration in the capital structure?

How is risk influenced by the capital structure?

What is the effect of increased or decreased risk in the capital structure?

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What is meant by capital structure?

Capital structure refers to how the corporation finances their activities. Most companies use a combination of debt financing (through loans), equity financing (through issuing stocks), or through investing in various securities. By using a combination of approaches, it mitigates a percentage of the risk involved in capital structure practices, because it eliminates the issue of all of the capital structure coming from one source. The capital structure is how the company raises needed capital to finance their capital projects. In today's economy, it is preferable for companies to not solely have debt financing, not only because it degrades the balance sheet and affects ...

Solution Summary

This solution provides a definition for capital structure and discusses capital structure measurement metrics and risk. This solution is 452 words.