The Optimal Capital Structure Is the One That

question 32

Multiple Choice

The optimal capital structure is the one that

• A)uses the most debt since debt has a lower cost of capital.
• B)maximizes the current value of the firm.
• C)uses the most common equity since this results in lower risk to the existing shareholders.
• D)maximizes ex-post shareholder value.

Recognize the exceptions when principals can be held liable for the acts of independent contractors.

Understand the definitions and distinctions between various types of power of attorney.

Comprehend the legal consequences of employment relationships and the conditions under which an employer may be held liable for the actions of their employees.

Grasp the concept of agency relationships, including how they are formed, operate, and terminate.

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Definitions:

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash transactions occur.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid, irrespective of when the transactions actually occurred.

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditure to the correct periods.

Asset Account

A financial account that represents the resources owned by a company, which have future economic value.