What is Capital Structure?
Capital structure refers to the mix of a company's sources of funding, both equity and debt, used to finance its overall operations and growth. It represents how a company chooses to raise capital to invest in its business activities, make acquisitions, or fund other strategic initiatives. A company's capital structure is a crucial aspect of its financial management and can have significant implications for its risk profile, cost of capital, and overall financial health.
The two primary components of capital structure are:
Equity: Equity represents the ownership interest in the company held by its shareholders. It is raised through the issuance of shares or retained earnings. Equity holders are entitled to a share of the company's profits, usually in the form of dividends, and have voting rights in corporate decisions.
Debt: Debt refers to the borrowed funds that a company raises by issuing bonds, loans, or other debt instruments.
How to Calculate Capital Structure?
Capital Structure calculator uses Capital Structure = Common Equity Weight+Debt Weight+Preferred Stock Weight to calculate the Capital Structure, The Capital Structure is the mixture of debt, preferred stock, and common equity used by a company to fund its operations and purchase assets. Capital Structure is denoted by CS symbol.
How to calculate Capital Structure using this online calculator? To use this online calculator for Capital Structure, enter Common Equity Weight (CEW), Debt Weight (DW) & Preferred Stock Weight (PSW) and hit the calculate button. Here is how the Capital Structure calculation can be explained with given input values -> 1.15 = 0.25+0.35+0.55.