Which of the Following Statements Is Correct

question 58

Multiple Choice

Which of the following statements is correct?

• A)If the profit-maximizing rule is fulfilled, it necessarily follows that the cost-minimization rule is being fulfilled.
• B)The profit-maximizing and the cost-minimizing rules are such that fulfilling one has no bearing on fulfilling the other.
• C)If the profit-maximizing rule is fulfilled, the cost-minimization rule may or may not be fulfilled.
• D)If the cost-minimization rule is fulfilled, it necessarily follows that the profit-maximizing rule is being fulfilled.

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Definitions:

Flotation Cost

The total costs a company incurs when it issues new securities, including underwriting fees, legal fees, and registration fees.

Debt-Equity Ratio

Debt-equity ratio is a financial ratio indicating the relative proportion of shareholders’ equity and debt used to finance a company’s assets.

External Financing

This refers to funds raised from outside the company, including loans, credit, or investments from external entities, to support the company's activities.

Capital Structure

The mix of debt, equity, and other financing methods used by a company to fund its operations and growth.