Description: Capital structure explained, Capital Structure, Capital Structure (2024 CFA® Level I Exam – Corporate Issuers – Learning Module 6), Capital Structure & Financial Leverage 1of3 - Pat Obi, #1 Capital Structure - Financing Decision - Financial Management ~ B.COM / BBA / CMA
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In finance , capital structure is the way a corporation finances its assets through some combination of equity , debt , or hybrid securities .
A firm's capital structure is the composition or 'structure' of its liabilities. For example, a firm that has $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm's leverage . In reality, capital structure may be highly complex and include dozens of sources of capital.
Leverage (or gearing) ratios represent the proportion of the firm's capital that is obtained through debt (either bank loans or bonds).