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What is Capital Structure and Leverage Insights about?

This chapter discusses capital structure and leverage. It defines capital as investor-supplied funds including debt, preferred stock, common stock, and retained earnings. Capital structure is the percentage mix of each type of capital. The optimal structure maximizes stock value by balancing the higher expected returns from debt against the increased risk. While operating leverage uses fixed costs, financial leverage uses debt. Financial risk is the additional risk debt places on stockholders. The example s

Author

Sukmawatii

Language

EN