capital structure (redirected from Capital structure theory)

Capital Structure

The means by which a firm is financed.

Notes:

A firm can finance operations through common and preferred stock, with retained earnings, or with debt. Usually a firm will use a combination of these financing instruments.

The proportion of short and long-term debt is considered when analyzing capital structure. And, when people refer to capital structure they are most likely referring to a firm's debt-to-equity ratio, which provides insight into how risky a company is. Usually a company more heavily financed by debt poses greater risk.

See also: Balance Sheet, Debt, Debt/Equity Ratio, Debt Financing, Equity, Equity Financing, Long Term Debt, Retained Earnings, Shareholders Equity

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Capital structure

The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.

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capital structure

See capitalization.