Which of the Following Statements About Debt Ratios Is (Are)supported

question 57

Multiple Choice

Which of the following statements about debt ratios is (are) supported by the empirical evidence?

• A)Firms with high accounting profits and more tangible assets tend to have lower debt ratios, all else equal.
• B)Firms with high corporate income tax rates tend to issue more debt, but often have relatively low debt ratios.
• C)Firms that generate higher stock returns use more debt and have higher debt ratios.
• D)Both A and B are supported by the empirical evidence.

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Definitions:

Available-for-sale Securities

Financial assets that are neither held for trading nor intended to be held to maturity, and can be sold in response to needs for liquidity or changes in interest rates.

Trading

The act of buying, selling, or exchanging financial instruments, commodities, or other assets in financial markets or over-the-counter.

Maturity

The date on which the principal amount of a loan, bond, or other financial instrument becomes due and payable.

Investee

An investee is a company or entity in which another entity holds an investment interest, usually signifying influence or control over the investee's financial and operational decisions.