capital-structure

Vocabulary Word

Definition

'Capital structure' is the mix of a company's financial sources, often debt and equity. Think of it as a recipe for a company's finance. Altering the mix can impact company's risk and potential returns.

Examples in Different Contexts

For investment analysis, 'capital structure' affects a firm's risk and return profile. An investment analyst might observe, 'Companies with a heavy debt in their capital structure are generally considered higher risk.'

Practice Scenarios

Operations

Scenario:

Uncertainty about our funding can constrain our operational decisions. Let's revisit the financial plan in our next meeting.

Response:

Our capital structure does influence the operating budget. It would be useful to discuss potential adjustments.

Business

Scenario:

Our company's debt levels have been rising recently. We need to assess implications on our financial stability.

Response:

I agree. Analyzing our capital structure can help us understand our financial risk and make plans to mitigate it.