Abstract: The main objective of a firm is maximization of shareholders wealth. In attempt to achieve this objective the shareholders appoint management board to oversee the firm’s operations. The management board then utilizes the firm’s capital components of debt and equity at their disposal to achieve this objective. The puzzle of financial managers is the optimal capital structure mix of debt and equity that will ensure the main objective of maximization of shareholders wealth is achieved. One of the key indicators of a firm that is achieving this objective is improved financial performance.