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Capital structure is how a company funds its operations and growth.  It is a mix of the company’s debt and equity.  Debt can be in the form of bonds issued or loans from financial institutions.  Equity can be in the form of stock or retained earnings.  Companies must evaluate opportunity cost when choosing between debt and equity. If a company chooses to borrow money to fund an expansion, then the money used to repay the principal and interest on the loan is not available to be invested into stocks. The company must evaluate the opportunity cost to see if the expansion made possible with the debt will generate enough revenue in the long term to justify passing on the stock investments. Opportunity cost is often calculated to evaluate financial decisions.  However, companies can use opportunity cost to govern their use of other resources, such as man hours, time or mechanical output.  Opportunity cost can be defined with any resource that is limited in the company.  Companies must make decisions about how to allocate these resources to different projects.  The time spent on one project is taken away from something else. Suppose, for example, a furniture company with 450 available man hours per week uses 10 man hours per chair to produce 45 chairs per week.  They decide to produce 10 sofas per week that take 15 man hours per sofa. This will use 150 man hours and produce 10 sofas. They will have 300 hours left to produce chairs, which will yield 30 chairs.  The opportunity cost of the 10 sofas, therefore, is 15 chairs (45−30=15){\displaystyle (45-30=15)}. If you are an entrepreneur, you will spend all of your time at your new business.  However, this is time that you could have spent working at a different job.  This is your opportunity cost.  If you have high earning potential in a different line of work, you must decide whether or not it is worthwhile for you to open your new business. For example, suppose you are a chef earning $23 per hour and you decide to leave your job to open your own restaurant.  Before you ever earn a penny from the new business, you will spend time buying food, hiring staff, renting the building and opening the restaurant.  You will eventually earn revenues, but the opportunity cost will be how much you would have earned working at your old job during all of that time.
Establish the capital structure of your business. Evaluate non-financial resources. Determine what your time is worth if you are an entrepreneur.