What are Capital Structure Decisions?

Management makes a capital structure decision when it decided the appropriate mix of debt and equity capital that its company uses to finance its assets and operations.

An example of a capital structure decision would be for a firm to issue new debt to finance a new factory instead of common stock.

Additional Accounting Examples and Tutorials:

Definition of Treasury Stock
Reasons Companies Issue Preferred Stock

What is Capital Budgeting?

In accounting, capital budgeting is about how a firm will utilize its fixed assets, such as a factory, to make use and make returns off of long-term investments.


A good example of this is a decision made by management to construct a new factory with machinery in order to meet demand for a new product. This is a capital budgeting decision


More Accounting Links:
Average Accounting Return

What causes a Liability?

Liabilities can result from certain types of contractual relationships with lenders, suppliers, customers, employees, governments, and other companies.