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Question
what is the combination of debt and equity used by a company to finance its activities known as?
net present value
leverage
capital structure
portfolio theory
Brief Explanations
To solve this, we analyze each option:
- Net present value (NPV) calculates the value of future cash flows in present terms, not related to debt - equity combination.
- Leverage refers to using debt to finance assets, not the combination of debt and equity.
- Capital structure is defined as the combination of debt and equity a company uses to finance its activities.
- Portfolio theory deals with investment portfolios, not a company's financing mix.
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C. Capital structure