As a General Rule, the Capital Structure That

question 152

Multiple Choice

As a general rule, the capital structure that:

• A) minimizes the cost of equity also maximizes the stock price
• B) maximizes the stock price also minimizes the weighted average cost of capital
• C) minimizes the cost of debt also maximizes the expected earnings per share
• D) increases operating leverage for a given quantity of output, increases business risk

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Definitions:

Current Ratio

A measure used to determine a company's potential to fulfill obligations due within one year by calculating the ratio of its current assets to its current liabilities.

Indicator Of Liquidity

Measures that indicate how easily a company can convert its assets into cash to cover short-term obligations.

Total Obligations

The sum of a borrower's current and long-term financial responsibilities.

Past Transactions

Completed financial activities or events that have occurred in the past and have been recorded in the accounting records.