Optimal Capital Structure

Filed Under » , , ,
Dictionary Says

Definition of 'Optimal Capital Structure'

The best debt-to-equity ratio for a firm that maximizes its value. The optimal capital structure for a company is one which offers a balance between the ideal debt-to-equity range and minimizes the firm's cost of capital. In theory, debt financing generally offers the lowest cost of capital due to its tax deductibility. However, it is rarely the optimal structure since a company's risk generally increases as debt increases.
Investopedia Says

Investopedia explains 'Optimal Capital Structure'

A company's ratio of short and long-term debt should also be considered when examining its capital structure. Capital structure is most often referred to as a firm's debt-to-equity ratio, which provides insight into how risky a company is for potential investors. Determining an optimal capital is a chief requirement of any firm’s corporate finance department.
Search results for

'Optimal Capital Structure'

  • CFA Level 1 Study Guide - Corporate Finance - Target Capital ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/target-capital-structure.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • CFA Level 1 Study Guide - Corporate Finance - The MM Capital ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/mm-capital-structure-versus-tradeoff-leverage.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • CFA Level 1 Study Guide - Corporate Finance - Effects of Debt on ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/debt-effects-capital-structure.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • Financial Statements: Long-Term Liabilities | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements8.asp
    ... What Is the Optimal Capital Structure? ... The optimal capital structure, the ideal
    ratio of long-term debt to total capital, is hard to estimate. ...

  • CFA Level 1 Study Guide - Corporate Finance - Tax and Bankruptcy ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/tax-bankruptcy-costs.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • CFA Level 1 Study Guide - Corporate Finance - Factors that ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/capital-structure-decision-factors.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • Evaluating A Company's Capital Structure

    http://www.investopedia.com/articles/basics/06/capitalstructure.asp
    ... equity ratio check out this video: Is there an optimal debt-equity ... total capitalization)
    compares the debt component of a company's capital structure (the sum ...

  • CFA Level 1 Study Guide - Corporate Finance - Setting Dividends ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/setting-dividends.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • CFA Level 1 Study Guide - Corporate Finance - Factors Affecting ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/factors-affecting-cost-of-capital.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a
    Complex Capital Structure. ... 11.27 The MM Capital Structure vs. ...

  • Investors Need A Good WACC

    http://www.investopedia.com/articles/fundamental/03/061103.asp
    ... Finally – Capital Structure The WACC is the weighted average of the cost of equity
    and the cost of debt based on the proportion of debt and equity in the ...

Related Articles

Bank Rates
Product Today Last Wk
$10K MMA 0.50% 0.51%
MMA 0.45% 0.46%
6 Month CD 0.46% 0.47%
1 Year CD 0.70% 0.75%
5 Year CD 1.46% 1.46%
1 Year Jumbo CD 0.66% 0.67%
Rate data provided by Bankrate
Product Today Last Wk
$30K HELOC 4.59% 4.60%
$30K Home Equity Loan 5.74% 5.77%
$50K Home Equity Loan 5.45% 5.50%
$50K HELOC 4.24% 4.24%
$100K Home Equity Loan 5.41% 5.46%
$100K HELOC 4.13% 4.13%
Rate data provided by Bankrate
Product Today Last Wk
30 Year Fixed 3.80% 3.80%
15 Year Fixed 3.09% 3.11%
1 Year ARM 3.54% 3.53%
30 Year Fixed Jumbo 4.38% 4.38%
5/1 ARM 2.65% 2.69%
3/1 ARM 2.69% 2.69%
Rate data provided by Bankrate
Product Today Last Wk
60 Month Used Car Loan 4.51% 4.51%
48 Month Used Car Loan 4.35% 4.35%
48 Month New Car Loan 3.24% 3.24%
36 Month Used Car Loan 4.34% 4.36%
36 Month New Car Loan 3.11% 3.13%
60 Month New Car Loan 3.35% 3.34%
Rate data provided by Bankrate
Partner Links