In theory, a firm's optimal capital structure is that which minimized the firm's overall cost of capital resulting in a maximization of the market value of a firm.

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It is widely accepted that a firm's optimal capital structure is the one that minimizes the overall cost of capital and maximizes the market value of the firm. This is because the cost of capital affects the firm's profitability, and thus, its value to shareholders. However, it is important to note that determining the optimal capital structure is not a straightforward task and depends on various factors such as the firm's business model, industry, and current market conditions.

In Theory, a Firm's Optimal Capital Structure Is That Which