Financial Structure

AAA

DEFINITION of 'Financial Structure'

The specific mixture of long–term debt and equity that a company uses to finance its operations. This financial structure is a mixture that directly affects the risk and value of the business. The main concern for the financial manager of the company is deciding how much money should be borrowed and the best mixture of debt and equity to obtain. The financial manager also has to find the least expensive sources of funds for the company to use.


Also referred to as capital structure.




INVESTOPEDIA EXPLAINS 'Financial Structure'

Financial structure is divided into the amount of the company's cash flow that goes to creditors and the amount that goes to shareholders. Each business will have a different mixture depending on its needs and expenses. Therefore, each company will have its own particular debt-equity ratio. For example, a company could issue bonds and use the proceeds to buy stock or it could issue stock and use the proceeds to pay its debt.

RELATED TERMS
  1. Capitalization Structure

    The proportion of debt and equity in the capital configuration ...
  2. Optimal Capital Structure

    The best debt-to-equity ratio for a firm that maximizes its value. ...
  3. Cost Of Equity

    In financial theory, the return that stockholders require for ...
  4. Debt Financing

    When a firm raises money for working capital or capital expenditures ...
  5. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  6. Capital Structure

    A mix of a company's long-term debt, specific short-term debt, ...
Related Articles
  1.  Here we take a look at how you can evaluate whether the debt will affect your investment.
    Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Quality financial reports allow for effective, informative fundamental analysis.
    Investing Basics

    The Importance Of Corporate Transparency

    Clear and honest financial statements not only reflect value, they also help ensure it.
  3. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  6. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  7. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  8. Options & Futures

    Top 7 Most Common Financial Mistakes

    Choose fortune over disaster by avoiding these money traps.
  9. Fundamental Analysis

    What role does discounted cash flow (DCF) play in stock valuation?

    Understand the meaning and significance of discounted cash flow, and learn how market analysts commonly use this stock evaluation tool.
  10. Fundamental Analysis

    What is the first day of the third quarter?

    Learn when the first day of the third quarter begins. Explore how reported financial results may have a profound impact on the price of shares.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center