Business Finance

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Description

Business Finance

Business Finance

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Optimal Capital Structure of a company is the debt/equity ratio that minimizes the cost of capital. For example, optimal capital structure is the equity ratio that will reduce the cost funding the company’s operations. In this case, the goal of optimal capital is to maximize the value of the company’s stock without increasing earnings per share. It is of importance to note that, the optimal capital structure can be determined by adding the percentage to the company’s cost of debt. Defining optimal capital structure is very essential to a company in increasing the returns and its capability to deal with competition.