Nov 12, 2018 · Capital structure is the composition of long-term liabilities, specific short-term liabilities, like bank notes, common equity, and preferred equity, which make up the funds a business firm uses for its operations and growth. The capital structure of a business firm is essentially the right side of its balance sheet. Capital Structure is the proportion of debt and equity in a firm’s capital that it uses to finance its assets for smooth operation and growth. Capital Structure Definition | Finance Dictionary | MBA Skool-Study.Learn.Share. Capital Structure. How a company finances its operations. The three most basic ways to finance are through debt, equity (or the issue of stock), and, for a small business, personal savings. Capital structure usually refers to how much of each type of financing a company holds as a percentage of all its financing. Capital structure refers to the permanent financing of the company, represented by owned capital and loan/debt capital (i.e.. Preferred Stock, Equity Stock, Reserves and Long- term Debts). In other words, it includes all long-term funds invested in the business in the form of Long-term Loans, Preference Shares and Debentures, including Equity Capital and Reserves.