Definition of Financial structure:
Financial structure refers to the mix of debt and equity that a company uses to finance its operations. This composition directly affects the risk and value of the associated business. The financial managers of the business have the responsibility of deciding the best mixture of debt and equity for optimizing the financial structure.
Framework of various types of financing employed by a firm to acquire and support resources necessary for its operations. Commonly, it comprises of stockholders (shareholders) investments (equity capital), long-term loans (loan capital), short-term loans (such as overdraft), and short-term liabilities (such as trade credit) as reflected on the right-hand side of the firms balance sheet. Capital structure, in comparison, does not include short-term liabilities.
In general, the financial structure of a company can also be referred to as the capital structure. In some cases, evaluating the financial structure may also include the decision between managing a private or public business and the capital opportunities that come with each.
How to use Financial structure in a sentence?
- Financial structure refers to the mix of debt and equity that a company uses to finance its operations. It can also be known as capital structure.
- Debt to capital and debt to equity are two key ratios that are used to gain insight into a company’s capital structure.
- Private and public companies use the same framework for developing their financial structure but there are several differences between the two.
- Financial managers use the weighted average cost of capital as the basis for managing the mix of debt and equity.
Meaning of Financial structure & Financial structure Definition