GB550_Unit_5_Assignment.docx Unit 5: Moore Plumbing Supply Company Capital Structure G

GB550_Unit_5_Assignment.docx    Unit 5: Moore Plumbing Supply Company Capital Structure  GB550: Financial Management  Purdue University Global    Questions  1.What is meant by capitalization? What is meant by a firms capital structure? For financial planning purposes, explain why either book or market value should be used to determine the firms capital structure. What is capital structure theory?  Capitalization is when a firm assesses and maximizes its capital structure. Thus, we need an understanding of capital structure to continue. Capital structure of a company is in reference to the firms equity. So, Capitalization is vital to a companys success because, all business strive to maximize their value.   In order to determine value, there are two options book value and market value. Both can be used in order to justify the value of a companys stock. Book values is the companys worth after liquidation of assets and liabilities paid. The market value of a company its based on its stock value in the public market. As market value is the firms ability to produce profit its weighted heavier in the decision-making process from investors however both come to play a part in determination of value.   Capital structure have different forms and variations depending on the industry under review. This is when capital structure theory comes into a light of its own. “Capital structure theories are studies that examine the factors that cause these differences” (Brigham & Ehrhardt, 2019). Two examples of capital st