A firm's capital structure is represented by its mix of:
A) assets.
B) liabilities and equity.
C) assets and liabilities.
D) assets, liabilities, and equity.

Question

Quizplus · Accepted Answer

Capital structure refers to the way in which a firm finances its operations and growth through a mix of debt and equity. Therefore, the firm's capital structure is represented by its mix of liabilities and equity. Assets and liabilities are both components of a firm's balance sheet, but the capital structure pertains specifically to the mix of financing sources. The option D is not incorrect, but it is redundant as equity is a component of a firm's balance sheet and thus already included in the assets and liabilities.

A Firm's Capital Structure Is Represented by Its Mix Of