Six of the Children in Mr

question 328

Multiple Choice

Six of the children in Mr.Myer's class were born on exactly the same day.This strikes him as astonishing and improbable.In this instance,he should be reminded that

• A) random sequences of events often don't look random.
• B) events often seem more probable in hindsight.
• C) we humans think we know more than we do.
• D) intuition is usually correct.

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Definitions:

Debt/Equity Ratio

The indicator that compares the role of debt and equity in financing company assets.

Financial Leverage

The use of borrowed money to increase the potential return of an investment, which also increases the risk of loss.

M&M Proposition

The Modigliani-Miller Proposition argues that in an ideal market, the value of a firm is unaffected by how it is financed, whether through debt or equity.