1. What is the Capital structure of a company? Compare and contrast the Capital
ID: 379107 • Letter: 1
Question
1. What is the Capital structure of a company? Compare and contrast the Capital structure of two Fortune 500 companies?
(One should be in the Energy sector and the other should be in the Technology sector.)
2. What is the relationship of Risk & return in Money and Banking ?
a) What is the risk of alternative capital structures?
b) What is their linkage to market value, and other important capital structure with considerations related to capital structure?
3. What is the EBIT-EPS approach to capital structure
Explanation / Answer
The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings.
A company's proportion of short and long-term debt is considered when analyzing capital structure. When people refer to capital structure they are most likely referring to a firm's debt-to-equity ratio, which provides insight into how risky a company is. Usually a company more heavily financed by debt poses greater risk, as this firm is relatively highly levered.
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