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:

(i) the cost saving benefits of a low WACC, and
(ii) 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
• Weighted average cost of capital