Question

How do you judge a business's well-being from examining its capital structure? Does it make a difference who you are (investor, lender, government, labor union, etc..)? Show us part of a balance sheet that represents stockholders' equity section of a company of your choice. Did you notice any notes attached to the financial statements relating to Stockholders' equity section? Please share with us your findings and provide your resources as well.

Answer 1

Capital structure refers to the ratio of debt and equity in the capital structure, it sets the leverage for the company which indicates how the shareholders and the creditors share the profits and the risk. High level of debt indicates less risk for the shareholders while more cost of capital as generally debt has higher interest rate.

Yes it does make a difference in a way they all have the different outlook to see how the financials go on.

I have attached equity shareholder section of 2017 10k of Cocal Cola from the link https://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2018/2017-10K.pdf.

There is a note regardnig the treatment of dividend paid to the investors in the form of shareholders.

Hope this helps. Thanks