Which of the Following Statements Is CORRECT

question 10

Multiple Choice

Which of the following statements is CORRECT?

• A) Generally, debt-to-total-assets ratios do not vary much among different industries, although they do vary among firms within a
• Given industry.
• B) Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in
• Most other industries.
• C) Drug companies (prescription, not illegal!) generally have high debt-to-equity ratios because their earnings are very stable and, thus, they can cover the high interest costs associated with high
• Debt levels.
• D) Wide variations in capital structures exist both between industries and among individual firms within given industries. These differences are caused by differing business risks and also
• Managerial attitudes.
• E) Since most stocks sell at or very close to their book values, book value capital structures are almost always adequate for use in
• Estimating firms' costs of capital.

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Definitions:

Tariffs

Taxes imposed on imported goods, often used to protect domestic industries from foreign competition.

Fair Trade

A social movement and market-based approach that aims to help producers in developing countries achieve better trading conditions and promote sustainability.

Free Trade

International trading practices characterized by minimal governmental intervention regarding tariffs, allowing for the unobstructed exchange of goods and services.

General Agreement on Trade and Tariffs

An international trade agreement signed in 1947, aimed at reducing tariffs and other trade barriers to promote global economic exchange.