Using Debt and Preferred Stock in the Capital Structure of a Firm

question 21

Multiple Choice

Using debt and preferred stock in the capital structure of a firm will _____.

• A) increase financial risk
• B) decrease business risk
• C) increase the tax payableby the firm.
• D) decrease operating leverage
• E) increase the book value of common stock

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Definitions:

Directs Behavior

Influences or guides actions and responses of an organism or system in certain situations, often in response to external stimuli or internal states.

Motivated State

A psychological condition in which an individual is driven or moved to behave in a particular way due to internal or external forces.

Physiological Need

A basic bodily requirement that must be met to maintain health and survival, such as the need for food, water, and sleep.

Drive Reduction

A theory in psychology that suggests motivation arises from the desire to reduce internal drives caused by unmet biological needs.