Capital Structure: Capital structure is the combination of borrowed funds and owned funds employed in financing the operation and growth of a business. Debt instruments like bonds, notes payable are some typical example of borrowed funds and securities like common stock, preferred share and retained earnings are some of the example of owned funds. Why is a company's capital structure, as measured by debt and equity ratios, important to financial statement analysts?

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Chapter 17, Problem 9DQ

To determine

Capital Structure:

Capital structure is the combination of borrowed funds and owned funds employed in financing the operation and growth of a business. Debt instruments like bonds, notes payable are some typical example of borrowed funds and securities like common stock, preferred share and retained earnings are some of the example of owned funds.

Why is a company's capital structure, as measured by debt and equity ratios, important to financial statement analysts?

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