CORPORATE FINANCE –CAPITAL STRUCTURE
Jakarta, 12 Januari 2021
Meaning of Capital Structure
•Capital structure is the particular combination of debt and
equity used by a company to finance its overall operations
and growth. Debt comes in the form of bond issues or
loans, while equity may come in the form of common
stock, preferred stock, or retained earnings. Short term
debt is also considered to be part of capital structure.
•It refers to proportion between the various long term
source of finance in the total capital of firm.
Type of Capitalization Structures
•Firms can either issue more debt or equity to fund its
operations. By issuing equity, firms give up some
ownership in the company without the need to pay back
investors; by issuing debt, companies their leverage by
needing to pay back investors. A company debt to equity
ratio (DER) is a measure of risk for investors.
Source: One of Company’s financial figure
Case Study
