Capital structure refers to the way a company finances its operations and growth through a mix of debt and equity. Debt includes loans and bonds that the company must repay, while equity represents ownership shares held by investors. The balance between these two sources of funding can significantly impact a company's financial health and risk profile. A well-structured capital mix can lower the cost of capital and enhance returns for shareholders. Companies often analyze their capital structure to determine the optimal ratio of debt to equity, considering factors like market conditions, interest rates, and their own business strategy.