Answer:-
Capital structure analysis examines how a company finances its operations through a mix of debt and equity. It helps determine the right balance between borrowed funds (loans, bonds) and owner’s equity (stocks, retained earnings) to optimize financial stability and growth. A well-structured capital mix reduces financial risk while maximizing returns. Key ratios like debt-to-equity (D/E) ratio, interest coverage ratio, and equity ratio help analyze financial health. Companies aim for a balance where debt isn’t too high to cause risk, nor too low to miss growth opportunities. Effective capital structure ensures long-term profitability and sustainability.
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