Which of the Following Is Correct

question 14

Multiple Choice

Which of the following is correct?

• A) Generally,debt to total assets ratios do not vary much among different industries although they do vary for firms within a particular industry.
• B) Utilities generally have very high common equity ratios due to their need for vast amounts of equity supported capital.
• C) The drug industry has a high debt to common equity ratio because their earnings are very stable and thus,can support the large interest costs associated with higher debt levels.
• D) Wide variations in capital structures exist between industries and also between individual firms within industries and are influenced by unique firm factors including managerial attitudes.
• E) Since most stocks sell at or around their book values,using accounting values provides an accurate picture of a firm's capital structure.

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Definitions:

Exchange Rates

The price at which one currency can be exchanged for another currency in the foreign exchange market.

Current Monetary Assets

Assets that are cash or can be quickly converted to cash, including currency, bank account balances, and short-term investments.

Plant and Equipment

Long-term assets used in the operation of a business, such as machinery, buildings, and vehicles.

Goodwill Impairment

A charge that companies record when the value of goodwill on the balance sheet exceeds its fair value, indicating that the asset is overvalued.