# Capital Structure

*Corporate Finance & M&A — Finicade finance glossary*

Capital structure is the mix of debt and equity funding a business. Debt is cheaper because interest is tax-deductible and lenders rank ahead of owners, but each additional layer raises the risk of distress. The optimum trades the tax shield against expected bankruptcy costs, which is why stable utilities carry far more leverage than volatile technology firms.

**Also known as:** capital mix, financing mix, gearing

**Related terms:** [WACC](https://finicade.com/glossary/wacc), [Modigliani-Miller Theorem](https://finicade.com/glossary/modigliani-miller-theorem), [Debt-to-Equity Ratio](https://finicade.com/glossary/debt-to-equity-ratio), [Cost of Debt](https://finicade.com/glossary/cost-of-debt), [Pecking Order Theory](https://finicade.com/glossary/pecking-order-theory)

Source: https://finicade.com/glossary/capital-structure