Finance is an important input for any type of business and is needed for working capital and for permanent investment. The total funds employed in a business are obtained from various sources. Some of the funds are permanently held in the business, such as share capital and reserves (owned funds), some others are held for a long period such as long-term borrowings or debentures, and still some other funds are in the nature of short-term borrowings.

Capital Structure represents the total long-term investment in a business firm. It includes funds raised through ordinary and preference shares, bonds, debentures, term loans from financial institutions, earned revenue, capital surpluses, etc.