ACC 311 Lecture Notes - Lecture 9: Capital Structure
Document Summary
Businesses finance the acquisition of assets from two external sources: funds supplied by creditors (debt, funds provided by owners (equity) The mixture of debt and equity a business uses is called its capital structure. Managers consider risk and cost when they borrow money. From the firm"s perspective, debt capital is more risky than equity capital because debt payments are a legal obligation. Interest that will be paid in the future is not included in the reported amount of the liability because it accrues and becomes a liability with the passage of time.
