Jet2 Task 2

In: Business and Management

Submitted By dybby
Words 2575
Pages 11
JET 2
Task 3
Deborah U. Myers The definition of capital structure is a “combination of a company’s long term debt, specific short term debt, common equity, and preferred equity, the capital structure is the firm’s various sources of funds use to finance its overall operations and growth. Debt comes in the form of bond issues or long-term notes payable, whereas equity is classified as common stock, preferred stock, or retained earnings. Short-term debt such as working capital requirements also is considered part to the capital structure (The Free Dictionary, 09).” “A mix or a company’s long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using difference sources of funds (Investopedia).” Basically Capital Structure is that the company should be able to manage the company with growth by using a combination of debt and equity for maintaining its financial status for survival. Debt is bond issues that are long-term notes payable, equity is common or preferred stock or retained earnings. Capital Structure is also known as debt-to-ratio equity ratio which will give a view of the company in terms or risk. Equity capital is moneys that are given and owned by shareholders. There are two types of equity capital: 1. Contributed Capital in which money invested is in exchange for company stock. 2. Retained earnings are the profits from past years that have been collected and used to strengthen the budget or fund growth of the company by acquisition or expansion.
Equity capital is often viewed as an expensive type of capital which can be used by the company due to the cost, which in turn requires that the company must attract more investment. Debt capital is the money that is borrowed and is put to work by the company. Long-term debt is most often…...

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