Target capital structure
The mix of debt and equity a company aims at, and the mix used to compute its weighted average cost of capital.
How to read the number
Valuation uses the target mix rather than today's: the current skew is usually temporary, while the rate is needed for the whole forecast horizon.
When the metric lies
The weights are taken at market values, not book values. Book equity can be negative at a company that is alive and expensively valued.
Also known as: target gearing