Define the term capital structure. Make a comparative assessment of different types of securities from the point of view of capital structuring.

Capital structure refers to the specific mix of debt and equity that a company utilizes to finance its overall operations and growth. It represents the proportionate relationship between different sources of long-term financing, including common equity, preferred equity, and various forms of debt. The capital structure decision is crucial for financial management as it influences a company's risk profile, cost of capital, and overall financial stability.

A company can finance its activities through different types of securities, each having distinct characteristics and implications in terms of risk, return, and financial flexibility. The key types of securities in capital structuring include:

1. Equity Capital (Common Stock)

• Nature: Represents ownership in the company. Shareholders have voting rights and receive dividends when declared.
• Risk & Return: Higher risk due to residual claim on earnings and assets, but potential for higher returns.
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