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Capital Structure
What does it mean?
The means by which a firm is financed.
In Other Words...
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.
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Related Terms
Balance Sheet | Debt | Debt Financing | Debt/Equity Ratio | Equity | Equity Financing | Long Term Debt | Retained Earnings | Shareholders Equity
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