Capital Structure Decisions

Capital structure decisions refer to how a company chooses to finance its operations and growth through a mix of debt (loans, bonds) and equity (stocks). These decisions are crucial because they affect the company's cost of capital, risk level, and overall financial health. A balanced capital structure helps maximize profitability while minimizing financial risk. Companies aim to find the right mix that enables them to invest in opportunities, pay off debts, and provide returns to shareholders, all while maintaining financial stability.