Capital Structure

La capital structure of a company refers to the distribution between the various sources of financing used for its operations and growth, in particular equity (ordinary or preferred shares) and debt (loans, bonds). In simple terms, it represents how a business finances its assets and activities. The proportion between debt and equity in this structure is crucial, as it influences the financial risk of the company. A capital structure that focuses heavily on debt can allow a company to benefit from a leverage effect, but also increases the risk of insolvency if it is not able to repay its loans. Conversely, an excessive dependence on equity can dilute the ownership and control of existing shareholders. Capital structure decisions must therefore strike a balance between the cost of capital, risks and financial flexibility.

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