Question

What are the two main objectives of capital structure?

Hint:

A well-planned capital structure ensures financial stability and allows businesses to achieve growth with optimal financial leverage.

Answer 1

The two main objectives of capital structure are: Step 1: Maximizing Shareholder Wealth.
The primary objective of capital structure is to create a mix of debt and equity that maximizes shareholder wealth by ensuring optimal returns with minimal risk.
Step 2: Minimizing Cost of Capital.
The capital structure should aim to minimize the overall cost of capital, balancing debt and equity in a way that reduces financial expenses and enhances profitability. Final Answer: The two main objectives of capital structure are maximizing shareholder wealth and minimizing the cost of capital.