CAPITAL STRUCTURE
DEFINITION
BALANCE CONSIDERATION
Capital structure refers to the
mix of debt and equity a
company uses to finance its
operations and growth.
Cost of debt vs. return on invest
Balance risk and reward
Debt financing vs. equity control
COMPONENTS
Equity
Debt
EFFECT OF HIGH DEBT
Increased financial risk
Reduced flexibility
BENEFITS
Higher cost
Maximizes firm’s value
Deteriorated credit
ratings
Enhance financial flexibility
Reduce cost of capital
FACTORS AFFECTING
IMPORTANCE
Increase financial risk
Influence firm’s risk and
return
Reduced flexibility
Higher cost
Tax considerations
Name : Shahrukh Hasan Sourov
ID : 23132636
Impacts cost of capital
Affect’s company’s value