Which of the Following Events Is Likely to Encourage a Company

question 15

Multiple Choice

Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?

• A) An increase in the corporate tax rate.
• B) An increase in the personal tax rate.
• C) An increase in the company's operating leverage.
• D) The Federal Reserve tightens interest rates in an effort to fight
• Inflation.
• E) The company's stock price hits a new high.

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Definitions:

Taxable Income

Income subject to taxation, after adjustments, deductions, and exemptions are accounted for.

Itemized Deductions

Expenses listed individually on a tax return that can be subtracted from adjusted gross income to reduce taxable income.

Joint Return

A tax return filed by married couples who choose to combine their taxable income into one return, potentially leading to tax benefits.

OASDI

The Old-Age, Survivors, and Disability Insurance program, part of Social Security in the United States, funded through payroll taxes.