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CS Executive · Corporate Accounting and Financial Management · Capital Structure

In financial management, the term 'capital structure' of a company refers to:

Capital structure means the mix of long-term sources of finance, namely equity shares, preference shares, debentures and long-term loans, that a company uses to fund its operations and assets. It is about the financing composition, not asset values or current asset ratios.

  1. AThe mix of long-term sources of funds such as equity, preference shares, debentures and term loansCorrect
  2. BThe total value of fixed assets held by the company
  3. CThe proportion of current assets to current liabilities
  4. DThe amount of profit retained after paying dividends in a year

Explanation

Capital structure is the composition of long-term finance used by a firm, i.e. the combination of equity, preference capital and long-term debt. Working capital ratios and asset values describe other aspects, not the financing mix.

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