The mix of debt and equity financing that a company uses to fund its operations and growth. It represents the proportion of borrowed money versus shareholder equity on the balance sheet.
From Latin 'capitalis' and 'structura' (arrangement/building). This concept became central to corporate finance theory in the mid-20th century as academics and practitioners sought to optimize the cost of capital.
There's no perfect capital structure - it's like a recipe that depends on the industry, economic conditions, and management philosophy. Airlines can handle high debt because of steady cash flows, while tech startups often rely heavily on equity because their future is uncertain!
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