Chapter 9, Problem 1RQ

What is capital structure? How do the capital structures of Ford and Microsoft differ?

To determine

The meaning of capital structure and the difference between the capital structure of Company F and Company M.

Explanation of Solution

Capital structure:

Capital structure is the mix (or) composition of debt and equity for the financing of a company.

Company F depends largely on its liabilities to finance its operations. On the other hand the Company M depends largely on its stockholders’ equity to finance its business operations.