How do you expect the capital structures of two firms to differ if one is involved in steel
QUESTION
How do you expect the capital structures of two firms to differ if one is involved in steel production and the other designs software to solve business problems?
Generally an industrial or a manufacturing firm (in this case a steel producing company) use both debt and equity to fund their expansion as well as working capital requirements. Whereas an IT company (software designing firm in this case) does not use debt, and majorly relies on equity for its capital.
s a steel producing company has a combination of debt and equity, thus making it cost of capital lower, whereas a company into software business primarily has equity capital, thus cost of capital is higher.
ANSWER:
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