Question:
Capital Structure refers to the mix between owners and borrowed funds. Which of the following is the correct formula?
Capital Structure refers to the mix between owners and borrowed funds. Which of the following is the correct formula?
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Remember, Capital Structure = Debt/Equity is the key formula for understanding how a company is financed.
Updated On: Apr 24, 2025
- Debt/Equity
- Equity/Debt
- Debt - Equity
- Debt * Equity
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The Correct Option is A
Solution and Explanation
The Capital Structure of a company is determined by the proportion of debt and equity financing. The correct formula to calculate the capital structure is Debt/Equity, which indicates the ratio of borrowed funds (debt) to the funds contributed by the owners (equity).
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