Other Things Held Constant, Which of the Following Events Is

question 63

Multiple Choice

Other things held constant, which of the following events is most likely to encourage a firm to increase the amount of debt in its capital structure?

• A) Its sales become less stable over time.
• B) The costs that would be incurred in the event of bankruptcy increase.
• C) Management believes that the firm's stock has become overvalued.
• D) Its degree of operating leverage increases.
• E) The corporate tax rate increases.

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Definitions:

Condition-Or-Sale Contracts

Agreements that stipulate the sale of goods is dependent on certain conditions being met, often used to protect the interests of the seller.

UCC

The Uniform Commercial Code, a set of laws that govern commercial transactions in the United States.

Simple Delivery Contract

An agreement where goods are transferred directly from the seller to the buyer without any special conditions or requirements.

Comprehensive Sales Contract

A legal document that outlines the complete terms of a sale, including details of the transaction, responsibilities of the buyer and seller, and procedures for resolving disputes.