DEFAULT RISK
Default risk is the risk that a borrower will not be able to make the required payments on their debt.
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Capital structure refers to the way a company finances its operations and growth through a combination of debt and equity. In trading, understanding a company's capital structure is essential for assessing its financial risk, cost of capital, and ability to withstand economic downturns. A highly leveraged capital structure can indicate higher risk, while a more equity-heavy structure is seen as more stable. Traders consider capital structure when valuing stocks and assessing the company’s financial stability and profitability.