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Business Definition for: capital structure
capital structure

composition of common stock, preferred stock and the various classes thereof, retained earnings, and long-term debt maintained by the business entity in financing its assets. However, not everybody agrees that long-term debt is part of the capital structure. Proponents say it finances long-term assets. Opponents say it is debt-due to creditors-which means it has significantly different characteristics compared to any form of owners' equity.

capital structure

corporation's financial framework, including long-term debt , preferred stock , and net worth . It is distinguished from financial structure , which includes additional sources of capital such as short-term debt, accounts payable, and other liabilities. It is synonymous with capitalization, although there is some disagreement as to whether capitalization should include long-term loans and mortgages. Analysts look at capital structure in terms of its overall adequacy and its composition as well as in terms of the debt-to-equity ratio called leverage.

See also par value , capitalization ratio
capital structure

the mix of long-term debt, common and preferred stock, and owner's equity financing a business enterprise. Analysts look at the proportion of long-term debt versus short-term debt and the amount of debt issued when analyzing capital structure. A company heavily financed by debt, as indicated by a high debt-to-equity ratio . gives some insight into a company's risk. Companies more heavily financed by debt are said to be more risky when applying for bank loans.

capital structure

corporation's financial framework, including long-term debt, preferred stock, and net worth. It is distinguished from financial structure , which includes additional sources of capital, such as short-term debt, accounts payable, and other liabilities.

capital structure

the composition of capital invested in a property, reflecting the interests of those who contributed both debt and equity capital .

Example: A small building was bought for $1 million, with the following amounts paid for its capital structure:
$600,000 first mortgage
$250,000 second mortgage
$150,000 equity

Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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