The Managerial Implications of Capital Structure Theory Include All of the Following

question 27

Multiple Choice

The managerial implications of capital structure theory include all of the following except:

• A)capital structure changes transmit important information to investors
• B)changes in capital structure result in changes in the market value of the firm's equity
• C)optimal capital structure is influenced heavily by the business risk facing the firm
• D)tax shield benefits from equity lead to increased firm value

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Definitions:

Amortization Process

The systematic reduction of a loan or the spreading out of capital expenses over a fixed period of time.

Investment Account

An account holding securities, cash, and other assets managed by an investment dealer or manager for the benefit of the investor.

Variable Interests

Interests in an entity that change based on changes in the entity's net asset value, income, or cash flows.

Lease Residual Value

The estimated value of a leased asset at the end of the lease term.