Chapter 13.2, Problem 13.10RQ

Summary Introduction

To discuss:

The agency problem in the owners and lenders and lenders role in the firm to incur agency expenses to resolve the problem.

Introduction:

The capital structure is the company’s total finances in their total operations and growth through multiple fund sources. The debt comes through the form of bond issues and long term notes payable, while the equity is segregated as common stock, preferred and retained earnings. The short term debt like working capital requirements are considered as part of the capital structure.