Capital structure decisions have long-term consequences for shareholders. Family business directors evaluate capital structure with an eye toward identifying the financing mix that minimizes the weighted average cost of capital. This decision is complicated by the iterative nature of capital costs: the financing mix influences the cost of the different financing sources. While the nominal cost of debt is always less than the nominal cost of equity, the relevant consideration for directors is the marginal cost of debt and equity, which measures the impact of a given financing decision on the overall cost of capital. The purpose of this whitepaper is to equip directors to contribute to capital structure decisions that promote the financial health and sustainability of the family business.
This whitepaper is the second in the “Corporate Finance in 30 Minutes Series.” Learn more about the whitepaper series below.
- Corporate Finance in 30 Minutes
- In this whitepaper, we distill the fundamental principles of corporate finance into an accessible and non-technical primer.
- Capital Structure in 30 Minutes
- Through this whitepaper, we equip directors to contribute to capital structure decisions that promote the financial health and sustainability of the family business.
- Capital Budgeting in 30 Minutes
- Capital Budgeting in 30 Minutes assists directors in evaluating proposed capital projects and contributing to capital budgeting decisions that enhance value.
- Capital Budgeting in 30 Minutes assists directors in evaluating proposed capital projects and contributing to capital budgeting decisions that enhance value.
- Dividend Policy in 30 Minutes
- From the perspective of family shareholders, dividend policy is the most transparent element of corporate finance. This whitepaper helps family business directors formulate and communicate a dividend policy that contributes to family shareholder wealth and satisfaction.
