A firm's capital structure can be determined by examining which parts of the firm's balance sheet?
A)The long-term assets
B)The debt and equity
C)The short-term assets and liabilities
D)None of the above because a firm's capital structure is best observed on the income statement.

Question

Quizplus · Accepted Answer

The capital structure refers to the mix of debt and equity that a company uses to finance its operations. Therefore, examining the debt and equity portions of the balance sheet will determine a firm's capital structure. Options A and C relate to the firm's assets and liabilities but do not provide information on the mix of debt and equity used by the firm. Option D is incorrect because the income statement shows a company's revenues, expenses, and profits but not the breakdown of debt and equity used to finance the company's operation.

A Firm's Capital Structure Can Be Determined by Examining Which