Target Capital Structure
Short definition
Target capital structure is the debt-equity mix the firm plans to carry through the medium term. WACC and beta relevering are built on these weights; transitory book leverage is not the target.
Detailed explanation
The target must fit debt capacity, rating/covenant caps and cash-flow volatility. Post-deal high leverage can be a path, not the target; locking WACC to that path breaks TV.
Market-value and book targets are not mixed. The net-debt definition (leases in or out) changes the denominator.
Why it matters for the CFO
Dividend and leverage policy walk toward this target. Writing today’s 10% debt weight as permanent in a valuation misprices the phase.
How it is calculated
w_E = E / (D + E), w_D = D / (D + E) (hedef piyasa ağırlıkları)
Variables in the formula
- E: Target equity weight (market)
- D: Target debt weight (market)
How to read it
If target D/(D+E) is 35% and today is 20%, the model uses 35% and financing policy is tied to that path. There is no universal target ratio; sector and lender policy set it.
Numerical example
Target E 1,200 mn TL, target net debt 800 mn TL → w_E = 60%, w_D = 40% (WACC weights).
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Definitions are educational. They are not investment, credit or tax advice.