A firm's capital structure refers to the firm's:
A)mixture of various types of production equipment.
B)investment selections for its excess cash reserves.
C)combination of cash and cash equivalents.
D)combination of accounts appearing on the left side of its balance sheet.
E)proportions of financing from current and long-term debt and equity.

Question

Quizplus · Accepted Answer

A firm's capital structure refers to the combination of financing from different sources such as debt and equity. It refers to the proportions of funding from these sources that the firm uses to invest in its operations and finance its growth. The capital structure decision is essential for a firm as it can affect its cost of capital, risk profile, and overall financial performance. A firm typically chooses a mix of debt and equity financing that maximizes its value while minimizing its cost of capital.

A Firm's Capital Structure Refers to the Firm's