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Meaning of capital struture

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Meaning of capital struture
  • 2 answers

Sanjana Singh 7 years, 2 months ago

Capital structure refers to a company’s outstanding debt and equity. It allows a firm to understand what kind of funding the company uses to finance its overall activities and growth. In other words, it shows the proportions of senior debt, subordinated debt and equity (common or preferred) in the funding. The purpose of capital structure is to provide an overview of the level of the company’s risk. As a rule of thumb, the higher the proportion of debt financing a company has, the higher its exposure to risk will be. Capital structure is commonly known as the debt-to-equity ratio.

Aryan Singhania 7 years, 2 months ago

It is a sum total of borrowed and owned capital of the firm
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