The optimal capital structure is that which results in the highest earnings per share because that will ensure maximum stock price.

Question

Quizplus · Accepted Answer

While a high earnings per share is an important consideration for a company's capital structure, it is not the only factor. Other factors, such as the cost of debt and equity and the company's ability to meet debt obligations, also play a role in determining the optimal capital structure. Additionally, the goal of maximizing stock price may not always be the primary consideration for a company; other goals, such as maintaining financial stability, may be more important.

The Optimal Capital Structure Is That Which Results in the Highest