Question

Which of the following term is used to represent the proportionate relationship between debt and equity?

• A. Cost of Capital.
• B. Capital Budgeting.
• C. Assets Structure.
• D. Capital Structure.

Answer 1

The correct option is D Capital Structure.

The term used to represent the proportionate relationship between debt and equity is Capital structure. Because by capital structure we mean to define the mix or proportion in which the capital of the company should be so as to maximize the benefit for the shareholders. While deciding the capital structure a lot of factors have to be taken into consideration and also the Debt-equity ratio is the indicator of the financial leverage of the company.