Financial Structure


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.

BREAKING DOWN '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.

  1. Debt/Equity Ratio

    Debt/Equity Ratio is debt ratio used to measure a company's financial ...
  2. Capitalization Structure

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

    The best debt-to-equity ratio for a firm that maximizes its value. ...
  4. Capital Structure

    A mix of a company's long-term debt, specific short-term debt, ...
  5. Debt Financing

    When a firm raises money for working capital or capital expenditures ...
  6. Cost Of Equity

    In financial theory, the return that stockholders require for ...
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