Capital Structures

Capital structure refers to how a company finances its operations and growth through a mix of debt (loans, bonds) and equity (stocks, ownership). Essentially, it’s the way a business decides to fund itself. A balanced capital structure is crucial because it affects financial risk, cost of capital, and overall profitability. Companies aim to optimize their capital structure to lower costs and maximize value for shareholders while managing the risk associated with borrowing and equity financing. Understanding capital structure helps investors gauge a company's financial stability and growth potential.