Asked by
Sheenlee Bagangan
on Dec 09, 2024Verified
A capital restructuring occurs when a firm:
A) Increases its debt-equity ratio while maintaining a constant debt-to-asset ratio.
B) Changes its debt-equity ratio without changing its total assets.
C) Reduces both its debt and its equity while maintaining a constant debt-equity ratio.
D) Changes its level of debt without changing its total equity.
E) Refinances its debt at a lower rate of interest.
Capital Restructuring
The process of reorganizing a company's capital structure, possibly involving changing the mix between debt and equity financing.
Debt-equity Ratio
An analysis ratio that shows how a company’s assets are financed through a combination of equity and debt.
Debt-to-asset Ratio
A financial ratio comparing the total debt of a company to its total assets, indicating how much of the company's assets are financed through debt.
- Comprehend the theory of capital structure and its impact on the valuation of a corporation.
Verified Answer
EA
Learning Objectives
- Comprehend the theory of capital structure and its impact on the valuation of a corporation.