Course: Corporate Finance; Contributor: Zulfiqar Hasan

Topic: Basics of Corporate Finance

Students of BBA Program, MBA Program or any other business programs can be benefited from this lecture slides.

Generally capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities.

A firm's capital structure is then the composition or 'structure' of its liabilities. 

Some times a company needs to change its current capital structure. In finance, it is called restructuring.

Factors That Influence a Company's Capital-Structure Decision: Business Risk, Companies Tax Exposure, Financial Flexibility, Management Style, Market position, Growth rate of the company etc.

The value of a firm is defined to be the sum of the value of the firm’s debt and the firm’s equity.

V = B + S
Here, B = Market value of the firm debt
S = Market Value of the Equity
V= Value of the Firm

If the goal of the management of the firm is to make the firm as valuable as possible, the the firm should pick the debt-equity ratio that makes the pie as big as possible.