Capital Structure

Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a firm, i.e. in a firm having a properly designed capital structure the aggregate value of the claims and ownership interests of the shareholders are maximized. The capital structure is sometimes referred as the “finance leverage” as each business has to consider the optimal ratio for running the between debt and equity.

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