A financial manager would have several tasks in order to determine optimal capital structure. Capital structure is the amount of debt and/or equity to fund its operations and finance its assets (Capital Finance Institute, 2020). Balancing both debt and equity will help a a firm find its optimal capital structure. When a firm expands, it has to find sources of financing for construction, additional staff, and additional equipment. Structuring the financing in a way that is sustainable and does not overburden the firm with interest payments and other associated costs is important. Optimal capital structure will result in the lowest weighted average cost of capital (WACC). A financial manager should have a solid grasp of the ability of the firm to repay debts while maintaining and growing operations.

Another factor is the amount of risk involved. A higher risk will necessitate a higher rate of return on the project (Capital Finance Institute, 2020). Financing rates will reflect this as investors will again ask that the firm is not over-extending its ability to finance a project. Growth plans and operating expenses must be kept in balance in order to avoid bankruptcy or default on loans. Each of these is important as it fits in the overall plan and vision of the organization.

Do you agree or disagree? please explain.