Register now or log in to join your professional community.
The average is calculated in a manner likely to cost LL structure which achieves a balance between self-financing and debt financing
The optimal structure of capital is the structure, your company have the efficiency to afford it or utlize it. Normally this ration is40:60 is called optimal, means40 Debt and60 Capital Share.
Hello,
Following the Finance theory, the optimal structure of one company`s capital looks like this:
>33,(3)% equity
> 33,(3)% long-term liabilities
> 33,(3)% short-term liabilities
Adding them up, you`ll get33,(3)% Equity and about66% Liabilities. That means you should finance your company`s activity from other sources instead of your own pocket ;)
If you need more details, just let me know
Valentin
DEFINITION of 'Optimal Capital Structure' The best debt-to-equity ratio for a firm that maximizes its value. The optimal capital structure for a company is one which offers a balance between the ideal debt-to-equity range and minimizes the firm's cost of capital.
Agree with Mr. Malik Khalid Mahmood
The capital represents all elements of production used in the production process, and usually use the same approved economic fundamentals in the appointment of the best level of production in economic theory to set the optimal capital that must be used by the enterprise productivity. This requires knowledge of the amount of capital used, which is the minimum of the capital they need all the productive process.
It is known that the appointment of the best level of production achieved when the marginal product of equal value with the marginal cost of production for the variable component.
This is the same basis used in determining the amount of capital required in the production process, in other words, the amount of capital the ideal in the production process
the optimal structure of capital is the structre which minimize the weighted average cost of capital
maximum equity in comparison of debt
Hello Everyone, i believe there is no fixed percentage or structure for all companies to follow. you should take under consideration the cost of finance (Whether internal or external) the market price and the expected return on each instrument (Debit or Equity) , the state of economy and the legal aspect of the company.
The Optimum Structure where your weighted Average cost of capital is at its minimum. Here you maximize the stockholders' wealth and sustain your business.
