The target capital structure and the companies that prefer them are:
Equity Capital structure:
- Managers with a conservative management style.
- Companies not in a position to provide collateral.
- Companies want to show a high credit rating.
Debt Capital:
- Companies with high growth rate.
- Businesses in the growth stage.
- Fast-growing companies like software.
What drives companies to pick either debt or equity?
Companies that are conservative and want to have high credit ratings will not employ debt as much because it is risky. Companies that cannot give collateral for debt also prefer equity.
Companies that are growing on the other hand, prefer to go for debt because they have the capacity to pay it off.
Find out more on the decision between debt and equity at https://brainly.com/question/24322461.
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