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CS Executive · Corporate Accounting and Financial Management · Capital Structure

Which statement correctly distinguishes capital structure from financial structure?

Capital structure includes only long-term sources of funds such as equity, preference capital and debt, whereas financial structure covers the entire liabilities side of the balance sheet, including short-term liabilities like trade payables and bank overdrafts.

  1. AThey are identical terms with no difference
  2. BCapital structure covers only short-term liabilities, while financial structure covers equity
  3. CCapital structure includes long-term sources only, while financial structure covers the entire liabilities side including current liabilitiesCorrect
  4. DFinancial structure excludes equity share capital

Explanation

Financial structure is the whole liabilities side of the balance sheet, including short-term sources such as trade creditors. Capital structure is the narrower permanent, long-term financing mix.

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