The Statement Concerning the Theory of Constraints (TOC) That Is

question 23

Multiple Choice

The statement concerning the theory of constraints (TOC) that is not true is:

• A) It centres on identifying bottlenecks in the organisation
• B) Constraints can be on the demand or supply side
• C) The theory is only relevant to a small number of businesses
• D) None of the statements is untrue, i.e. all are true statements

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Definitions:

MM Propositions

The Modigliani-Miller propositions, which are foundational theorems in corporate finance, asserting that under certain conditions, the value of a firm is unaffected by its capital structure.

Optimal Capital Structure

The best mix of debt and equity financing that maximizes a company’s market value while minimizing its cost of capital.

Leverage

The use of borrowed funds with the aim to increase the potential return of an investment.

Capital Mix

Capital mix refers to the combination of debt and equity financing used by a company to fund its operations and growth.