Capital structure

Definition of capital structure:

The capital structure describes the structure and composition of capital. It should be optimally designed for the company. Criteria can be:

The amount of capital that makes individual financing alternatives appear appropriate or inexpedient from the outset or that may be limited by the company's management.

the Cost of capital, which can be incurred once and / or continuously and are also called financing costs. They can be very different in height.

Capital term

The capital term, which is primarily based on the intended use. For example, it does not seem advisable to cover a short-term peak in capital requirements with long-term capital. Likewise, short-term capital does not serve long-term capital requirements.

Capital flexibility

The capital flexibility, which should make it possible to give up previously used financing alternatives in favor of (more cost) cheaper current financing alternatives. Shorter terms and timely termination options make refinancing easier, but on the other hand they are also more risky.

Capital security

Capital security, with which capital providers try to minimize their risk of loss, in particular by checking the creditworthiness of the borrower and through collateral to be provided by the borrower.

Influence of capital

The influence of capital, which can be expressed in the demand for co-determination, participation, information, control, setting of guidelines and participation by the financier.

Optimization of the capital structure

The optimization of the capital structure is also sought with the help of the financing rules, which, however, are only suitable to a very limited extent.