This document discusses theories of capital structure and firm valuation. It defines optimal capital structure as the combination of debt and equity that maximizes firm value by minimizing the overall cost of capital. It then lists various determinants of capital structure and patterns that capital structures can take. It describes approaches to determining an appropriate capital structure, such as EBIT-EPS, valuation, and cash flow approaches. Finally, it discusses leverage, capital structure theories including the relevant, irrelevant, and neutral theories, and assumptions of capital structure theories.