Capital Structure: Debt vs. Equity Explained

Explore the fundamentals of a firm's capital structure and learn how companies balance debt and equity to optimize their cost of capital. This tutorial covers key concepts, including:

- Debt vs. Equity Dynamics: Risks, returns, ownership rights, and operational flexibility.
- Definition of Capital Structure: Expressed as debt-to-equity or debt-to-total-capital ratios.
- Weighted Average Cost of Capital (WACC): The formula and importance of minimizing WACC.
- Applications in M&A: How capital structure influences mergers, acquisitions, and leveraged buyouts (LBOs).
- Recapitalization Strategies: Methods for altering capital structure, such as issuing debt to repurchase equity or repay debt.

Gain valuable insights into how businesses fund their operations, manage risk, and drive shareholder value through strategic capital allocation. This video is an essential guide for anyone who wants to master corporate finance and strategic capital management!

Chapters:
00:00 - Optimal Capital Structure
00:54 - Weighted Average Cost of Capital
01:25 - Debt & Equity Dynamics
02:01 - Methods of Recapitalization
02:50 - Capital Structure in M&A
03:18 - Leveraged Buyouts (LBO)

#CapitalStructure #CostOfCapital #Debt #Equity #CorporateFinance

[JonesDawg]

Why does paying dividends decrease equity? 2:45

[ntcuongct]

Dear friends, I have a question: Could you explain the relationship between Capital structure and company value?. Thanks.