What is Capital Structure?

Capital structure describes how a corporation finances its assets. This structure is usually a combination of several sources of senior debt, mezzanine debt and equity. Wise companies use the right combination of senior debt, mezzanine debt and equity to keep their true cost of capital as low as possible. Depending on how complex the structure, there may in fact be dozens of financing sources included, drawing on funds from a variety of entities in order to generate the complete financing package. Capital structure is what describes the relationship of these financing sources as they appear on the corporation’s balance sheet.

Examples of capital sources that may be included in a corporation’s capital structure are: