Firms Often Have Suboptimal Capital Structures Because

question 71

Multiple Choice

Firms often have suboptimal capital structures because

• A) their managers do not understand the theory of optimal capital structure.
• B) some business owners think their firm will never become insolvent.
• C) firms are affected differently by bankruptcy and agency costs.
• D) some firms do not pay taxes.
• E) operating leverage is more important than financial leverage in some firms.

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Definitions:

Tooth

A hard, calcified structure found in the jaws of many vertebrates, used for cutting, grinding, and crushing food.

Mandibular Alveolus

A socket in the jawbone that houses the roots of the teeth.

Suture

A type of joint between the bones of the skull where the bones are closely bound together by connective tissue.

Synostosis

A condition or process where two or more bones, originally separate, fuse together.