Which of the Following Statements Is CORRECT, Holding Other Things

question 30

Multiple Choice

Which of the following statements is CORRECT, holding other things constant?

• A)Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs, hence they tend to use relatively little debt.
• B)An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.
• C)If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.
• D)An increase in the company's degree of operating leverage is likely to encourage a company to use more debt in its capital structure.
• E)An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.

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Definitions:

No-fault Divorce

A legal process whereby a marriage can be dissolved without needing to establish wrongdoing by either party.

Divorce Law

The body of law dealing with the dissolution of marriage, including the division of assets, custody of children, and alimony.

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A state of mental health characterized by positive feelings, low levels of distress, and a satisfying sense of personal fulfillment and growth.

Emotional Well-being

A state of positive psychological functioning that includes feeling good about oneself, being able to cope with stress effectively, and having positive social relationships.