The capital structure of the firm can be defined as
A)the firm's mix of different debt securities.
B)the firm's mix of different securities used to finance assets.
C)the market imperfection that the firm's managers can exploit.
D)the firm's mix of different debt securities, the firm's mix of different securities used to finance assets, and the market imperfection that the firm's managers can exploit.

Question

Quizplus · Accepted Answer

The capital structure of a firm refers to the way in which a company finances its overall operations and growth by using different sources of funds. This includes a combination of debt and equity, and also includes the mix of different securities used to finance the purchase of assets. Choice A is only partially correct because it focuses solely on debt securities, whereas the capital structure includes all types of securities. Choice C refers to a market imperfection that managers may exploit to create financing advantages, but this is not a definition of capital structure. Choice D combines all three options, but it is too broad and not a complete definition of capital structure.

The Capital Structure of the Firm Can Be Defined as