Small Business

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Capital structure is the way in which a corporation has financed its assets by using a combination of equity, or debt. Many organizations will grow their company by investing some percentage of their own equity, and the rest by use of debt obtained from creditors. Optimizing this ratio so that the organization has the highest chance of success is important. In times of crisis it may become beneficial to take on more debt in order to sustain a company through lean times. On the other hand, reducing debt to save on interest payments may also serve a company in time of crisis. It is important to look at a company’s financials in order to determine the most optimized capital structure.