Asked by
Credence Welles
on Nov 07, 2024
Verified
In general, observed capital structures:
A) Tend to overweigh debt in relation to equity.
B) Are easily explained in terms of earnings volatility.
C) Are easily explained by analyzing the types of assets owned by the various firms.
D) Tend to be those which maximize the use of the firm's available tax shelters.
E) Vary significantly across industries.
Capital Structures
The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, constituting how a firm finances its overall operations and growth.
Tax Shelters
Investment strategies or financial arrangements used to minimize tax liabilities, often by deferring or reducing taxable income.
- Identify the effects that choices related to the capital structure have on a company's valuation and the expense of capital.
Verified Answer
LS
Learning Objectives
- Identify the effects that choices related to the capital structure have on a company's valuation and the expense of capital.