Assessing the appropriate capital structure

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Firms must identify its capital needs prior to assessing the appropriate capital structure. The next step is for the firm to undertake all considerations in completing the necessary analysis to ensure its capital structure is suitable. As you mentioned, a common technique is comparative credit analysis. This technique helps to identify various capital structures that are consistent with its rating target.

Although this technique is effective, what are the potential shortfalls in relying solely on this approach?

Reference no: EM1351886

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