Abstract
The relevance of a company capital structure has been the subject of several theories and debate. The capital structure of a company is a mix of different securities. Capital structure refers to the way a corporation finances itself through a combination of equity sales, equity option, bonds and loans. So it is essentially a debate over the proportion of debt and equity financing the company. However capital structure is not just a question about debt and equity. There are multiple compositions of debt or equity and convertible bonds. The aim of every company is run a profitable business. An optimal capital structure refers to the particular combination which minimizes the cost of capital, and maximizing the stock price. It's an important financial decision undertaken by the managers of the company. It's necessary to assess the effect of the capital structure choice on the investor's behaviour. The proportion of debt and equity has an implication for stockholder value.
