Why Capital Structure Matters

📉 Your cost of capital directly impacts your valuation

Cost of capital (WACC – weighted average cost of capital) represents the minimum return you must earn to satisfy both lenders and shareholders. Lower WACC = higher valuation. A well-structured mix of debt and equity reduces WACC, boosting your company’s intrinsic value.

🔄 Debt is cheaper — but comes with risk

Debt is typically less expensive than equity because interest is tax-deductible and lenders take less risk than shareholders. However, too much debt increases financial risk, reduces flexibility, and can endanger the business in downturns.

📈 Equity is flexible — but dilutive

Equity doesn’t require fixed payments and offers breathing room in volatile times. But it dilutes ownership and comes with higher expected returns for investors.

The Goal: Optimal Capital Structure

The optimal capital structure is the point where your WACC is at its lowest, and firm value is at its highest.

It depends on:

• Industry norms and volatility

• Profitability and cash flow stability

• Growth stage of the business

• Access to capital markets

• Ownership goals and risk appetite

There is no one-size-fits-all. But there is a well-informed, data-driven sweet spot.

How Flow Advisory Can Help

At Flow Advisory, we help business leaders in Romania and beyond answer key capital structure questions with confidence:

🔍 Assess current capital structure

We analyze your existing debt and equity mix, cost of each source, and impact on WACC.

📊 Model different capital structure scenarios

We show how small shifts in leverage can impact your valuation, return on equity, and risk profile.

📈 Advise on debt financing and equity strategy

From negotiating bank terms to preparing for an equity round, we guide you through the full financing journey.

🎯 Support long-term value creation

Our goal is to align your capital structure with your strategic plan — maximizing growth without compromising resilience.

The Bottom Line

Smart capital structure decisions don’t just fund growth — they unlock value. Whether you're scaling, exiting, or optimizing for resilience, your debt-equity mix matters more than you think.

Let’s make it a competitive advantage.