Capital Structure Decisions
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...blocks. First, one may observe him placing larger blocks on the bottom, and smaller ones on top. Of course, it could be just the opposite, and the child, not having any type of plan before hand, just begins stacking the blocks however they will best balance on the next block. Eventually, the whole structure comes falling down. Though business is more than child’s play, it could be equated along the same lines as the building blocks: structure is everything and can even affect a company’s market value.
To see how this is possible, it is necessary to explain what capital structure is, and how it functions in regard to the company.
Capital Structure is the mix of securities that are issued within a company. These securities can be anything from the fixed assets of a company, such as equipment, commercial property owned, etc., to the intangible assets of brand loyalty and consumer confidence. Alsoluded in a company’s ‘toy chest’ are the building blocks...
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