The optimal capital structure is the capital structure that strikes a balance between risk and return such that the firm's stock price is maximized.

Question

Quizplus · Accepted Answer

The statement is true. The optimal capital structure is the combination of debt, equity, and other sources of funding that minimizes the cost of capital and maximizes the value of the firm for its shareholders. The ultimate goal is to achieve a balance between risk and return that leads to the highest possible stock price.

The Optimal Capital Structure Is the Capital Structure That Strikes