Capital structure is the structure of two main sources of finance (Debt & Equity) that a company maintains on its books. A capital structure is made up partially from debt and partially from equity.
A capital structure that is mostly financed with debt is considered riskier as it bears the great risk of default and there is a high amount of interest has to be paid out of profits before distribution to ordinary shareholders. Due to this reason, the ordinary shareholders require a higher rate of return from the company for compensation against the high default risk they are bearing.
Two ratios measure capital structure:
Debt/Equity ratio = Total Debt / Total Equity
Debt/Total Assets = Total Debt / Total assets
Star, Inc., a prominent consumer products firm, is debating
The capital structure of Ricketti Enterprises, Inc., consists of 20
Klose Outfitters Inc. believes that its optimal capital structure consists of
Bruce & Co. expects its EBIT to be $185,
A firm is about to double its assets to serve it’s rapidly
One position expressed in the financial literature is that firms set their
Kahn Inc. has a target capital structure of 60% common
Hardmon Enterprises is currently an all-equity firm with an expected
Green Manufacturing, Inc., plans to announce that it will issue
Adams Corporation is considering four average risk projects with the following costs
