DECA Financial Consulting Complete Practice Exam

Question: 1 / 400

What does the term 'capital structure' mean?

The processes used to evaluate market entry strategies

The mix of debt and equity financing a company uses to fund its operations and growth

The term 'capital structure' refers to the specific mix of debt and equity that a company utilizes to finance its operations and growth. Understanding capital structure is crucial for businesses as it impacts their risk profile, cost of capital, and overall financial health.

A company typically chooses a combination of debt (like loans and bonds) and equity (like stock) to fund its activities, and this balance can affect how investors view the company. A well-structured capital mix can help a company minimize its cost of capital while optimizing growth potential. Thus, option B accurately captures the essential meaning of capital structure by highlighting the significance of both debt and equity in a company’s financing strategy.

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The overall financial performance of a company

The administrative frameworks used in business operations

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