The optimal capital structure of a company is a combination of debt and equity financing that maximizes the market value of the company by minimizing the cost of the capital.
However, a hefty amount of debt increases the financial risk to the shareholders, and the return on equity that they need.
The difference specified between the working capital for the two reporting periods is specified as the change in working capital. The changes in the working capital are included in cash flow operations because companies usually increase and decrease the current assets and current liabilities for funding their ongoing operations.
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