Question

What is meant by Capital Structure?

Define 'Capital Structure'

Answer 1

Capital structure refers to the ratio of debt and equity in the total capital of a company.
Algebraically,

Capital Structure = `"Debt"/"equity" or "Debt"/"Debt+equity"`

Answer 2

Capital structure refers to the proportion of debt and equity used for financing business operations. It affects the profitability and financial risk of the business, and hence, companies generally use the concept of financial leverage to set up the capital structure