If a Firm Finances with Only Debt and Common Equity

question 58

True/False

If a firm finances with only debt and common equity, and if its equity multiplier is 3.0, then its debt ratio must be 0.667.

---

Definitions:

Confrontation

A direct encounter between individuals or groups characterized by a clash of opinions, beliefs, or interests, often used in therapeutic contexts to address issues.

Sublimation

A defense mechanism in psychoanalytic theory where socially unacceptable impulses or idealizations are unconsciously transformed into socially acceptable actions or behavior.

Displacement

In psychology, a defense mechanism where an individual shifts negative feelings or behaviors from the original source to a safer or more accessible target.

Defense Mechanisms

Psychological strategies used unconsciously to protect oneself from anxiety or unacceptable thoughts and feelings.