Capital structure refers to the balance between a company's assets and liabilities, the nature of its assets, and the composition of its borrowings. It is also commonly used in the context of a company's debt-equity ratio and the mix of debt classes in structured finance instruments.
A financial ratio illustrating the proportional relationship between a company's debt and its equity, reflecting its financial leverage and risk.
Financial distress refers to a situation in which the activity of a business is influenced by the possibility of impending insolvency. This state incurs various costs, ranging from those related to bankruptcy to costs arising from stakeholders' changes in behavior and managerial focus.
Financial leverage refers to the use of debt in a firm's capital structure to amplify the returns on equity. It is an essential concept in corporate finance that can significantly impact a company's earnings and risk profile.
Gearing refers to the relationship between funds provided to a company by ordinary shareholders and long-term funds with a fixed interest charge such as debentures and preference shares. High gearing implies higher fixed charges on debt, impacting investment risk and returns.
Interest cover, also known as the fixed-charge-coverage ratio, is a financial metric used to assess a company’s ability to meet its interest obligations from its earnings before interest and tax (EBIT).
Leverage refers to the use of various financial instruments or borrowed capital—such as margin—to increase the potential return of an investment.
