A General Rule for Managers to Follow Is to Set

question 23

Multiple Choice

A general rule for managers to follow is to set the firm's capital structure such that:

• A)the firm's value is minimized.
• B)the firm's value is maximized.
• C)the firm's bondholders are made well off.
• D)the firms suppliers of raw materials are satisfied.
• E)the firms dividend payout is maximized.

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Definitions:

Long-Term Bonds Payable

Bonds that are due for repayment after a period exceeding one year from the balance sheet date.

Cash Ratio

A liquidity measure that compares a company's most liquid assets (cash and cash equivalents) to its current liabilities.

Bad Debt Expense

The cost associated with accounts receivable that is not expected to be collected.

Quality of Income

A measure of the conservatism of a company's earnings with respect to its ability to generate cash flows, indicating the robustness of earnings.