Companies around the world raise funds in capital markets to finance expansion, acquisitions and other operations. This is typically done through equity and/or debt financing. Equity financing is the process by which a company raises capital through the sale of shares. Debt financing involves the company borrowing, for example by issuing bonds. The company's decision on how to increase its capital influences its capital structure and, therefore, can affect the value of the company. It is therefore important that the company takes into account the risks associated with equity and debt financing. In order to make an optimal decision, a company that uses both equity and debt must ensure an optimal debt-to-equity ratio, that is, one that minimizes costs and risks and maximizes the overall value of the company. The traditional view of capital structure is that changes in the debt ratio would affect the value of the company because they would change the risk borne by shareholders. Therefore, for the company to determine its optimal capital structure, it must consider the cost of capital for the company in accordance with the financial asset pricing model which states that individual investors demand a higher return in compensation for an increase in the risk they bear. and Miller (1958) argued that, under certain assumptions, a firm's debt ratio does not affect the cost of capital. According to them, there is no optimal debt ratio and the amount of debt issued by the company does not matter and has no bearing on the amount or quantity of borrowers. They also argued that changes in the debt ratio would not affect the value of a company. This means that the value of the company is independent of its capital structure ... middle of paper ...... is no longer demanded or consumed, if company X needs more machines, it could itself have a large quantity of redundant assets. Machines have maximum production levels, that is, a limit to which they can produce at any given time. If demand for the product increases significantly, the machine may be unable to produce at a level that would satisfy demand. As labor capital increases, the quantity of labor will decrease. Even if Company X has a flexible workforce that can be easily laid off, laying off some of the workforce will have a cost. This cost includes compliance costs related to retirements and compensation reduction programs. My advice to Company.