Asked by Ntswaki Mereki on May 20, 2024
Verified
If a firm had the following mix of capital components: its capital structure would be described as:
A) 25% debt and 75% equity
B) 25% debt, 20% preferred stock, and 55% equity
C) 45% debt and 55% equity
D) both a and b
Capital Components
The various sources of funding that a company uses to finance its operations and growth, including debt and equity.
Capital Structure
The mix of the three capital components (debt, preferred stock, and equity) used by a firm. The optimal capital structure is the structure at which stock price is maximized, all other things held equal. Also see Target capital structure.
Equity
The value of an ownership interest in property, including shareholders' equity in a company.
- Pinpoint the parts of capital and their individual expenses.
Verified Answer
AC
Anirudh Christopher AnandMay 24, 2024
Final Answer :
B
Explanation :
The capital structure includes both debt and preferred stock, making it a combination of both choices A and B. Specifically, it is made up of 25% debt, 20% preferred stock, and 55% equity.
Learning Objectives
- Pinpoint the parts of capital and their individual expenses.