Managers Should Not Change the Capital Structure Unless It Departs

question 28

Multiple Choice

Managers should not change the capital structure unless it departs significantly from the optimal level because such a change would

• A) change incentives of stakeholders.
• B) reduce dividends.
• C) incur transactions costs.
• D) increase fixed costs.

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Definitions:

Contracted-for Shipment

An agreement to transport goods to a specified location under the terms of a contract.

Letter of Credit

A financial document issued by a bank guaranteeing a buyer's payment to a seller within a specified timeframe, providing security in international trade.

International Sale of Goods

Transactions involving the sale of goods between parties residing in different countries.

Finance Corporation

An organization, typically a company, devoted to managing, investing, or lending money to individuals or other companies.