The capital structure of a Company tells us about the blend of debt and equity used to fund the business’s complete operations and growth.
In a vertical capital structure, the base is formed from a small portion of equity share. The base is the foundation on which the super structure of preference share capital as well as debt is developed. Any increase in the capital is majorly through debt.
As per the Pecking Order Theory, a Company initially tries to fund itself through retained earnings. In case the Company does not have retained earnings to finance itself, then, in that case, it should go for debt.