What are the four capital structures?

Capital structure is an important part of enterprise financing activities, which reflects the structure of enterprise financing activities. Aiming at the question "What are the four capital structures?", through the in-depth study of relevant theories, this paper introduces four capital structure forms in detail, namely, equity capital structure, debt capital structure, equity capital structure and mixed capital structure.

1. What are the four capital structures?

1, equity capital structure

Equity capital structure refers to the capital structure of enterprises adopting equity financing, which is the main form of enterprise financing structure. Equity capital structure is characterized by low financial leverage and low debt financing ratio of enterprises. Because shareholders can control their operation and management, the financial risk of enterprises is low. However, the disadvantages of equity financing are low return on investment, high cost and poor liquidity of equity financing.

2. Debt capital structure

Debt capital structure refers to the capital structure that enterprises adopt debt financing, which is the main form of enterprise financing structure. Debt capital structure is characterized by high financial leverage and high debt financing ratio. The disadvantage of debt financing is that the cost and risk of debt financing are high, and the financial risk of enterprises is high.

3. Equity capital structure

Equity capital structure refers to the capital structure adopted by enterprises in equity financing and is the main form of enterprise financing structure. Equity capital structure is characterized by low financial leverage, low corporate debt financing ratio and low corporate financial risk. The disadvantages of equity financing are low return on investment of equity investors, high cost of equity financing of enterprises and poor liquidity of equity financing.

4. Mixed capital structure

Mixed capital structure refers to the capital structure that enterprises adopt the combination of equity financing and debt financing, and it is the main form of enterprise financing structure. The mixed capital structure is characterized by low financial leverage, low debt financing ratio and low financial risk, and equity financing and debt financing can be effectively combined. The disadvantages of mixed capital structure are high financing cost and poor liquidity of financing.

Second, the advantages and disadvantages of capital structure

1, advantages

(1) Capital structure can improve the return on investment of enterprises, thus improving their profitability;

(2) Capital structure can improve the financial leverage ratio of enterprises, thus improving the financial efficiency of enterprises;

(3) Capital structure can improve the financing ability of enterprises, thus enhancing their competitiveness;

(4) Capital structure can improve the operating efficiency of enterprises, thus improving the management level of enterprises.

2. Disadvantages

(1) Capital structure may bring higher financing costs;

(2) Capital structure may bring higher financial risks;

(3) Capital structure may bring low return on investment;

(4) Capital structure may lead to poor liquidity.

Three. conclusion

Capital structure is an important part of enterprise financing activities, which reflects the structure of enterprise financing activities. Aiming at the question "What are the four capital structures?", through the in-depth study of relevant theories, this paper introduces four capital structure forms in detail, namely, equity capital structure, debt capital structure, equity capital structure and mixed capital structure. In addition, this paper also introduces the advantages and disadvantages of capital structure in order to provide reference for enterprise financing activities.

This paper introduces four forms of capital structure in detail, namely, equity capital structure, debt capital structure, equity capital structure and mixed capital structure, as well as the advantages and disadvantages of capital structure, in order to provide reference for enterprise financing activities.