Which of the Following Statements Is Correct, Other Things Held

question 30

Multiple Choice

Which of the following statements is correct, other things held 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) An increase in the company's degree of operating leverage is likely to encourage a company to use more debt in its capital structure.
• D) 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:

Statistic

A single measure, reported as a number, used to summarize a set of data.

Null Hypothesis

The hypothesis that there is no significant difference or effect, typically the hypothesis a researcher tries to disprove.

Distribution

Describes how the values of a variable are spread or distributed across different categories or intervals.

P > .05

Indicates that the probability of obtaining the observed data under the null hypothesis exceeds 5%, typically leading to failing to reject the null hypothesis.