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The Capital Structure Box provides three pieces of information about a company:

1. If you were to buy the entire company today, how much would the whole company cost you and how much would be from Stock, Preferred Stock, and Debt?

          Also shown here is the % of Debt to Total Capital. Watch for amounts over 25%. Debt can be used to advantage in times of a good economy, but can act like a stone around a company's neck in bad economic times. The size of the debt is like the size of the stone around your neck.

     Debt can also be an inflator of one of our measurements of management's efficiency, Return on Equity of section 2B. Click here to see how debt affects Return on Equity.

     The fewer number of share of a stock outstanding the more potential volatility there is in the price, too.

2. What percentage is owned by "Insiders," aka mamagement?

     It's nice to have management's money invested right along side your money. They're likely to be more concerned about the company's growth if their money is at risk.

     The percentage to look for depends upon the size of the company. 20% to 30% would be good for a small to mid-size company while 2% to 3% would be fine for a very large company. Be cautious of a company in which insiders hold a very large percentage of the shares, perhaps 40% or more.  They may vote their interests above yours and other shareholders.

3. What percentage is owned by "Institutions"? aka Pension Funds, Mutual Funds, etc.

     Institutions tend to sell at the drop of a hat.  Many of them don't pay taxes on their trades, and mutual funds simply pass those taxes on to their shareholders.

     High institutional ownership can make a stock's price very volatile.