Not All Firms Have the Same Optimal Capital Structure

question 51

Multiple Choice

Not all firms have the same optimal capital structure. Factors that might influence a firm's capital structure include:

• A) the industry in which it operates.
• B) the volatility of its sales and operating income.
• C) the collateral value of its assets.
• D) all of the above

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Definitions:

Price-Earnings Ratio

A measure used to value a company that shows how much investors are willing to pay per dollar of earnings.

Earnings Per Share

A company's profit divided by the outstanding shares of its common stock, indicating profitability.

Market Price

The ongoing market price for an asset or service available for purchase or sale.

Total Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue.