What Is Optimal Capital Structure

question 39

Multiple Choice

What is optimal capital structure?

• A)It is the mix of debt, preferred stock and common equity that maximizes profits.
• B)It is the mix of debt, preferred stock and common equity that minimizes risk.
• C)It is the mix of debt, preferred stock and common equity that minimizes the weighted cost of the firm's employed capital.
• D)It is the mix of common and preferred stock that maximizes dividends to the stockholders.

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Definitions:

Qualitative Mission Statement

A statement that conveys a company's core values and goals through descriptive and quality-focused language.

Strategic Focus

The concentration of an organization's efforts and resources on a specific business objective or direction to achieve competitive advantage.

Stakeholders

Individuals or groups that have an interest or concern in the organization and can affect or be affected by the business' activities, objectives, and policies.

Executive Summary

A brief, comprehensive summary of a business report or proposal, highlighting the main points and conclusions.