A Company with a Capital Structure That Shifts More Toward

question 13

True/False

A company with a capital structure that shifts more toward debt financing will appear to be in a stronger position to pay interest and any principal amount that may be maturing by using its cash flows generated by operating activities.

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Definitions:

Nonpayment of Dividends

The failure of a corporation to distribute earned profits to its shareholders at expected times.

Flotation Costs

The costs incurred by a company when issuing new securities, including underwriting, legal, and registration fees.

Positive Effect

A beneficial or favorable outcome or impact of a particular event, action, or policy.

Stock Prices

The cost at which a share of a company can be bought or sold on the stock market.