Measures the mix of debt and equity used to finance a company’s assets.

What it Measures ?

What’s the balance between borrowed and owned money.

Relevant StakeHolders 

CFO, Risk Manager

In-depth Use Case / Real-world Example

Capital Structure Analysis examines the proportion of debt versus equity a company uses to fund its operations and investments. It involves analyzing ratios like the Debt-to-Equity (D/E) ratio, which helps to understand the risk and leverage a company is taking on. If a company’s D/E ratio is 2.0, it means the company has twice as much debt as equity. Companies with high leverage may face higher financial risks, especially in volatile markets, but also have the potential for higher returns. On the other hand, companies with low leverage might be underutilizing growth opportunities. Capital Structure Analysis is essential for determining the optimal balance between debt and equity to reduce cost of capital while maintaining financial flexibility.