The Trade-Off Theory of Capital Structure Predicts That

question 14

Multiple Choice

The trade-off theory of capital structure predicts that:

• A) Unprofitable firms should borrow more than profitable ones
• B) Safe firms should borrow more than risky ones
• C) Rapidly growing firms should borrow more than mature firms
• D) Increasing leverage increases firm value

Recognize the importance of employee vacations as a strength in the system of internal controls for promoting operational efficiency.

Understand the scope of internal control, emphasizing the significance of authority levels and physical controls.

Acknowledge the role of technology in internal controls and the persistent need for such systems in automated environments.

Identify the principles of segregating duties to enhance the effectiveness of internal control systems.

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Definitions:

Rotor

A component of disc brake systems, a flat, circular plate that the brake pads clamp onto to slow or stop the vehicle.

Reciprocating Pistons

Components in an engine that move up and down within cylinders to convert fuel into mechanical energy.

Valves

Mechanical devices in an engine that open and close to allow the intake of fuel/air mixture and the exhaust of combustion gases.

Camshaft Open

The period when the camshaft lifts the valve off its seat, allowing for air/fuel mixture intake or exhaust gas expulsion.