The Modigliani and Miller Hypothesis Does NOT Work in the "Real

question 86

Multiple Choice

The Modigliani and Miller hypothesis does NOT work in the "real world" because

• A) interest expense is tax deductible, providing an advantage to debt financing.
• B) higher levels of debt increase the likelihood of bankruptcy, and bankruptcy has real costs for any corporation.
• C) dividend payments are fixed and tax deductible for the corporation.
• D) both A and B

Recognize the criteria for classifying items as unusual or infrequent in financial reporting.

Identify the characteristics and reporting requirements of discontinued operations.

Grasp the definition and importance of sustainable operations in financial statements.

Understand the concept of period costs and their treatment in financial reporting.

---

Definitions:

Dental Hygiene

The practice of keeping one's mouth, teeth, and gums clean and healthy to prevent disease.

Laser Teeth Whitening

A cosmetic dental procedure using laser technology to accelerate the bleaching effect on teeth, making them appear whiter in short sessions.

Ultimate Consumer

The end user of a product, who uses it for personal, family, or household purposes.

Retail Stores

Places of business that sell goods or merchandise directly to consumers, ranging from clothing and groceries to electronics and household items.