Explain capital structure theories.

Capital structure theories are also theory which will be reflecting a systematic approach of finding an optimum mixture of different component of the capital in order to maximize the rate of returns of capital structure will always trying to focus on the finding out best combination of debt capital and equity capital or external financing and internal financing in order to have an adequate profitability for the business along with the risk management and shareholders value maximization.

There are different type of capital structure theories and they are like optimal capital structure theory along with trade off theory.