A Firm with Highly Liquid Assets Plus Unused Debt Capacity

question 64

Multiple Choice

A firm with highly liquid assets plus unused debt capacity is said to have ____.

• A) arbitrage structural capacity
• B) the optimal capital structure
• C) financial slack
• D) optimal financial structure

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Definitions:

Optimal R&D

The most efficient level of investment in research and development activities that maximizes the benefits from new knowledge and products.

Expected Rate Of Return

The estimated gain or loss of an investment over a given period, expressed as a percentage.

Interest-Rate Cost-Of-Funds

The cost to borrowers or the rate paid to savers and investors based on the interest rates in the financial markets or the rate of return required on investment funds.

Marginal Cost Curve

A graphical representation depicting the cost added by producing one more unit of a particular good, often upward sloping due to increasing costs.