If a firm had the following mix of capital components: its capital structure would be described as:

A) 25% debt and 75% equity
B) 25% debt, 20% preferred stock, and 55% equity
C) 45% debt and 55% equity
D) both a and b

Capital Components

The various sources of funding that a company uses to finance its operations and growth, including debt and equity.

Capital Structure

The mix of the three capital components (debt, preferred stock, and equity) used by a firm. The optimal capital structure is the structure at which stock price is maximized, all other things held equal. Also see Target capital structure.

Equity

The value of an ownership interest in property, including shareholders' equity in a company.