Which of the Following Is a Lesson Gleaned from the Empirical

question 31

Multiple Choice

Which of the following is a lesson gleaned from the empirical evidence that a CFO might find useful in determining his own firm's capital structure?

• A)CFOs should simply copy the capital structure of their firm's peers since the optimal capital structure seems to be the same for firms within the same industry.
• B)The failure to rebalance his firm's capital structure when market forces change it is the sign of a bad manager.
• C)The decision whether to rebalance a firm's capital structure, if necessary, when market forces change it should be based on a cost-benefit analysis.
• D)Capital structure is irrelevant,which is why smart CFOs do not bother to rebalance their firm's capital structure when market forces change it.

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Definitions:

Cohesiveness

The characteristic of molecules or particles sticking together in a mass, important in various physical and biological processes.

Ionic Bonds

A chemical bond formed between two ions with opposite charges through the transfer of one or more electrons from one atom to another.

Polar Covalent Bonds

A type of chemical bond where two atoms share a pair of electrons, but the electrons are not shared equally, leading to a distribution of charge.

Water Molecules

Water molecules consist of two hydrogen atoms and one oxygen atom bonded together, making up the liquid that is vital for all forms of life on Earth.