Capital structure refers to how much of a company's money comes from creditors versus owners and helps to reveal the cost of using that capital.
For example, a growing retailer is funded by $400,000 in bank debt and $600,000 in owner's equity — a 40/60 debt-to-equity split. An investor reviewing this capital structure might see it as conservatively financed and relatively low-risk.
Why it matters: The mix of debt and equity dictates the company's risk profile, cost of capital, and who ultimately controls the business.
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