If a CFO Wants to Maintain a Targeted Capital Structure

question 13

Multiple Choice

If a CFO wants to maintain a targeted capital structure, she should

• A)repurchase shares when the firm's stock price has increased considerably.
• B)issue more equity when the firm's stock price has increased considerably.
• C)issue more debt whenever interest rates fall, and retire debt when interest rates rise.
• D)both A and B.

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Definitions:

Excess of Par

The amount by which a security's sale or issue price exceeds its par value.

Treasury Shares

Shares released to the public and afterward reclaimed by the issuer, cutting down the overall count of stock available on the open market.

Journalize

The process of recording transactions in an accounting journal.

Par Common Stock

Par Common Stock refers to the nominal or face value assigned to common shares in the corporate charter, which has implications for stock issuance and accounting.