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What is a capital structure and how does it relate to the interest rate? What might...

What is a capital structure and how does it relate to the interest rate? What might this have to do with business cycles?

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Answer #1

The capital structure is a structure that determines how a firm finances it's overall operations and growth by using different sources of funds

Interest rates influences a capital structure by affecting the cost of debt capital like bank loans, personal loans, credit card debt and bonds

Due to these capital structures and the influence of interest rates business cycles get manifested in many economic forms like lending to monetary policy restrictions. Under monetary restrictions payout of companies reduces and debt equity ratio gets affected.

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