Understanding Capital Structure of the Company

Deciding the suitable capital structure is an important decision of financial management because it is closely related to the value of the company. The capital structure of the company presents the combination of the company’s existing debt and equity capital raised in order to finance or run the business operations of the company. The capital structure varies whenever there is change in invested equity and/or debt of the company. The nature of Debt in the capital structure varies from plain vanilla bond to complex convertible debts. Equity capital can be categorized under common and preferred equity in a broader sense.

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