Question

The firm has multiple choices of sources of financing, justify the following statements

Answer 1

The capital structure is the particular combination of debt and equity used by a company to finance its overall operations and growth. Debt comes in the form of bond issues or loans, while equity may come in the form of common stock, preferred stock, or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.

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Answer 2

Answer:

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There are ultimately just three main ways companies can raise capital: from net earnings from operations, by borrowing, or by issuing equity capital. Debt and equity capital are commonly obtained from external investors, and each comes with its own set of benefits and drawbacks for the firm.