Capital Structure of Companies

Capital Structure of Companies includes specific short term debt, common equity, long term debt as well as preferred equity. The structure mainly deals with a firm’s capability to finance its overall operations and growth with the use of various sources of funds. The balance of equity and debt on the balance sheet is represented by an ideal capital structure.

Debts can be calculated in the form of long term notes payable and also in the form of bond issues whereas; equity can be termed as preferred stock, common stock and retained earrings. You can also consider short term debts in the form of working capital requirement as a part of capital structure of a company. A company is said to be over levered if its balance sheet shows too much debt. By looking at the capital structure of a company, it can be easily accessed how risky a company really is.

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Edited and Updated 31st May 2014

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