The capital structure of the firm can be raised externally through:

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The capital structure of the firm can be raised externally through debt and equity. Debt can be in the form of loans, debentures, or bonds, which have to be repaid with interest. This method of raising capital has the advantage of tax deductibility of interest payments. Equity financing, on the other hand, involves issuing stocks, which represent ownership in the company. This method has the advantage of not having to pay interest but dilutes the ownership of existing shareholders. A combination of debt and equity can be used to create an optimal capital structure that balances the advantages and disadvantages of each type of financing.

The Capital Structure of the Firm Can Be Raised Externally