Which of the following is primarily affected by a company's capital structure?

The correct choice centers on the cost of capital, which is significantly influenced by a company's capital structure. Capital structure refers to the way a company finances its overall operations and growth by using different sources of funds, primarily debt and equity. The composition of this structure determines the company's risk profile and the cost associated with raising funds.

When a company opts for more debt financing, it may benefit from tax deductions on interest payments, potentially lowering its overall cost of capital. However, excessive debt can increase financial risk, leading to higher required returns from equity investors. As a result, a well-structured capital framework seeks to minimize the overall cost of capital while balancing risk.

In contrast, employee satisfaction, market competition, and product innovation can be influenced by various external and internal factors, but they do not primarily hinge on how a company structures its capital. Employee morale might relate to corporate culture and policies rather than financial strategies. Likewise, market competition and product innovation are driven more by industry dynamics, market conditions, and management vision than the specific financial makeup of the firm.