Capital structure refers to the mix of a company’s debt and equity used to finance its operations and growth. It represents how a business raises capital to fund assets, operations, and expansion, balancing borrowed funds (debt) and ownership capital (equity). The capital structure is a key indicator of a company’s financial health, risk, and long-term sustainability.
Capital structure plays a crucial role in a company’s financial strategy because it:
Components of Capital Structure
Startups consider several factors when designing their capital structure:
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