Business Glossary

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.

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.

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.

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.

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