Corporate Debt Restructuring

The Capital Structure

Capital Structure refers to the way a company finances its assets through some combination of debt and equity

The capital structure of a company is the composition, the structure of its liabilities.

The great contribution of the Trade-Off theory of Modigliani-Miller and their followers is that these models identify the specific benefits and costs of using debt (i.e. the tax effects and the costs of financial distress).

A company will choose how much debt and how much equity should finance its investments by balancing the relevant costs and benefits.