During the past year it has been made possible to buy back a company’s outstanding stock. This is done in order to change the capital structure towards a situation with less equity. A change in capital structure means a change in the cost of capital for a company and by that a change in the value for the stockholder. This Master Thesis studies the relation between capital structure and business risk. Studying the debt to equity ratio in a company captures capital structure. Studying the volatility in return on assets over a certain time period captures business risk. The Master Thesis also includes a study of what factors have an impact on the business risk when looking at the day-to-day business. By conducting a study of the pulp and paper industry and its nine listed companies a picture is created of what factors have an impact on the relation between capital structure and business risk. The business risk is in a very high degree dependant on factors like economic development for the product, raw material prices, number of product groups and what segments the company penetrates. A positive relation between capital structure and business risk has been identified. The study also indicates that other factors than just the business risk should be hold responsible for a company’s capital structure.