Which of the Following Statements Is True Ofthe Optimal Capital

question 43

Multiple Choice

Which of the following statements is true ofthe optimal capital structure?

• A) It is found by determining the debt-equity mix that maximizes expected EPS.
• B) It simultaneously maximizes EPS and minimizes the WACC.
• C) It minimizes the cost of equity, which is a necessary condition for maximizing the stock price.
• D) It simultaneously minimizes the cost of debt, the cost of equity, and the WACC.
• E) It should have the combination of debt and equity thatwill maximize the price of the firm's stock.

Understand the importance of financial statement information for creditors and its role in performance evaluation.

Interpret key financial ratios, including profit margin, fixed asset turnover, and total asset turnover.

Understand the impact of changes in accounts receivable, inventory, and fixed assets on cash flow and how this is reflected in the statement of cash flows.

Evaluate the use of industry benchmark information for financial analysis.

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Definitions:

Service Department

A division within a company that provides supportive services to other internal departments or production units.

Cafeteria

A type of food service location within an institution where there is a selection of different meals available, generally serving food in a self-service manner.

Service Department

A division within a company that performs support functions, aiding the production or sales departments but not generating revenue directly.

Information Technology

The use of computers, storage, networking and other physical devices, infrastructure, and processes to create, process, store, secure, and exchange all forms of electronic data.