IN THE MARCH 1967 ISSUE of this Journal Douglas Vickers asserts that conditions describing an optimum corporate capital structure, defined as the degree of financial leverage which minimizes the weighted average cost of capital for any given level of capital employment, can be expressed in terms of the elasticities of the supply functions confronting the corporation in the debt and equity sections of the capital market.' This note will demonstrate that Vickers' analysis is misconceived. The results he obtains in terms of elasticities of supply in the debt and equity markets are just as likely to provide the worst capital structure as the optimum, and, in a wide range of cases, neither the worst nor the optimum capital structure can be specified in terms of his analysis. As the reader may well surmise already, Vickers' error rests in his failure to analyze second order conditions. Vicker's results may be obtained very simply by considering the problem of minimizing the cost of financing given assets, where the cost of finance, Cf, is defined as the total annual payments both to stockholders and bondholders necessary to obtain funds for financing the given assets. Since units of value measure are arbitrary we can let assets be assigned unity value. Total value of funds obtained is equal to the sum of the values of equity and debt securities issued, S plus B, and this in turn equals unity. Where Ki is yield on debt and Ke is yield on equity, the problem is to minimize