Assume you are a business owner. How would you structure your capital accounts? Would you use debt, with its relative low cost and tax deductible interest expense, but which must be repaid? Or would you use equity, whose dividends are paid with after tax dollars, but which does not have to be repaid and is more costly? Or would you use a combination of debt and equity and in what ratio? Does the ratio of debt to equity depend on the type of business you are in?