Optimal capital structure

1.

The capital structure which results in the lowest Weighted Average Cost of Capital (WACC).

2.

The most appropriate capital structure taking account of both:

• The immediate cost saving benefits of a low WACC.
• The potential flexibility and safety benefits of a more conservative capital structure (with a relatively lower proportion of debt finance).

See also

• Capital structure
• Modigliani and Miller
• Pecking order theory
• Weighted average cost of capital