Assertion: A capital structure will be said to be optimal when the proportion of debt and equity is such that it results in an increase in the value of the equity shares as well as debenture holders. 

Reasoning: All decisions relating to capital structure should emphasize on increasing the shareholders’ wealth.

Assertion (A) is not true but Reasoning (R) is correct.

Capital structure of a company, thus, affects both the profitability and the financial risk. A capital structure will be said to be optimal when the proportion of debt and equity is such that it results in an increase in the value of the equity share. In other words, all decisions relating to capital structure should emphasize on increasing the shareholders’ wealth.