Which of the Following Statements Is CORRECT

question 61

Multiple Choice

Which of the following statements is CORRECT?

• A) If Congress lowered corporate tax rates while other things were held constant,and if the Modigliani-Miller tax-adjusted theory of capital structure were correct,this would tend to cause corporations to decrease their use of debt.
• B) A change in the personal tax rate should not affect firms' capital structure decisions.
• C) "Business risk" is differentiated from "financial risk" by the fact that financial risk reflects only the use of debt,while business risk reflects both the use of debt and such factors as sales variability,cost variability,and operating leverage.
• D) The optimal capital structure is the one that simultaneously (1)maximizes the price of the firm's stock, (2)minimizes its WACC,and (3)maximizes its EPS.
• E) If changes in the bankruptcy code made bankruptcy less costly to corporations,this would likely reduce the average corporation's debt ratio.

Understand the accounting treatment and cash flow reporting for asset acquisitions and disposals.

Understand the effect of dividends on stockholders' equity and cash flows.

Understand the preparation and reporting of cash flows from investing activities, including the treatment of sales and purchases of capital assets.

Know the reporting requirements for the operating activities section of the cash flow statement under both the direct and indirect methods.

---

Definitions:

Discrimination

Unfair or unequal treatment of individuals based on characteristics such as race, gender, age, or sexual orientation.

Equitable Treatment

Refers to the fair and impartial treatment of all individuals in the workplace, considering their specific circumstances and needs.

Ethnocentrism

The act of judging another culture solely based on the values and standards of one's own culture.

Multicultural Organization

A company or institution that incorporates a diverse mix of cultures, ideologies, and talents to foster an inclusive environment.