Which of the Following Statements Is Correct

question 39

Multiple Choice

Which of the following statements is correct?

• A) When financial leverage is used, the graphical probability distribution of net income would tend to be more peaked than a distribution where no leverage is present, other things held constant.
• B) From an operational standpoint the goal of maintaining financial flexibility translates into maintaining adequate reserve borrowing capacity.
• C) While business risk varies form one industry to another and can change over time, it affects all firms equally within a particular industry.
• D) The optimal capital structure is the one that maximises EBIT, and this always calls for a debt ratio which is lower than the one that maximises expected EPS.
• E) The above statements are all false.

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Definitions:

Financial Stability

Refers to the condition where an individual or institution can withstand economic fluctuations without experiencing undue hardship, maintaining a steady stream of income and managing debt effectively.

Household Duties

Tasks and chores that are required to maintain the running of a home, such as cleaning, cooking, and gardening.

Obergefell V. Hodges

A landmark civil rights case in which the Supreme Court of the United States ruled that the fundamental right to marry is guaranteed to same-sex couples.

Same-Sex Couples

Romantic partnerships between two individuals of the same gender, recognized in various legal, social, and cultural contexts.