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| Name | Capital Structure Explained for Dummies | Debt, Equity, Stock | Balance Sheets |
| Video Uploader | Video From Free Mini MBA |
| Upload Date | This Video Uploaded At 14-12-2021 15:43:55 |
| Video Discription | Credit: The Great Harrison Metal (This has been uploaded to help people for free) Capital structure refers to the specific mix of debt and equity used to finance a company's assets and operations. From a corporate perspective, equity represents a more expensive, permanent source of capital with greater financial flexibility. A company’s capital structure is the result of such financing decisions that may be guided by capital structure policies or targets set by management and the board. Capital structure is also the result of such factors as company size and maturity, which influence the financing options a company may have available. Besides equity and debt issuance, capital structure can also be significantly affected by merger and acquisition (M&A) activity, which can be financed by cash, borrowing, share assumption and/or debt assumption in addition to proceeds from divestitures and asset sales. Capital structure is also affected over time by the company’s operations, which might consume or generate cash, and by management decisions regarding dividends and share buybacks. Company life cycle: Companies typically evolve over time from cash consumers to cash generators, with decreasing business risk and increasing debt capacity. Cost of capital: From a theoretical perspective, company management seeks to maximize shareholder value and determines an optimal capital structure to minimize the company’s weighted average cost of capital (WACC). “Optimal capital structure” involves a trade-off between the benefits of higher leverage, which include the tax deductibility of interest and the lower cost of debt relative to equity, and the costs of higher leverage, which include higher risk for all capital providers and the potential costs of financial distress. Financing considerations: From a practical perspective, company management may consider several factors in capital structure decisions and the use of leverage. Competing stakeholder interests: In seeking to maximize shareholder value, company management may make capital structure decisions that are not in the interests of other stakeholders, such as debtholders, suppliers, customers, or employees. https://www.cfainstitute.org/en/membership/professional-development/refresher-readings/capital-structure |
| Category | People & Blogs |
| Tags | capital structure | corporate finance | finance | Capital structure explained | debt equity | stock types explained | finance for dummies | investing for dummies | accounting for dummies | aswath damodaran | capital structure in financial management | optimal capital structure | target capital structure |
