The term capital structure describes:
A) The mixture of debt and equity a ﬁrm uses to ﬁnance its operations.
B) The mixture of long-term investments a ﬁrm has made.
C) The mix of preferred stock and common stock that makes up the equity account of a ﬁrm.
D) The ﬁrm's short-term assets and short-term liabilities.
E) The mixture of short-term liabilities a ﬁrm uses to ﬁnance its short-term assets.

Question

Quizplus · Accepted Answer

Capital structure refers to the way a company finances its operations and growth by using different sources of funds, such as debt and equity. Therefore, choice A is the correct answer as it describes the mixture of debt and equity a firm uses to finance its operations. Choices B, C, D, and E are incorrect as they do not accurately describe capital structure.

The Term Capital Structure Describes