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- Maximum possible use of leverage
- To avoid undue financial/business risk with the increase of debt
- The use of debt should be within the capacity of the firm
- It must avoid undue restrictions in agreement of debt
- Should have minimum possible risk of loss of control
- The capital structure should be conservative. It should be composed of high grade securities and debt capacity of the company should never be exceeded.
- The capital structure should be simple – easily managed and understood by investors.
- The debt should be used to the extent that it does not threaten the solvency of the firm.