What Should Be the Relation Between the Target Capital Structure

question 35

Multiple Choice

What should be the relation between the target capital structure for a firm and the firm's optimum capital structure?

• A) Target and optimum capital structures should be the same.
• B) Target capital structure is more conservative overall.
• C) Target capital structure contains more debt.
• D) Target capital structure excludes preferred stock.

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Definitions:

Trade Deficits

Occurs when a country's imports of goods and services exceed its exports, leading to more money leaving the country than coming in.

Saving Rate

The saving rate is the proportion of income that is not spent on consumption, but rather set aside for future use, often expressed as a percentage of total income.

Current Account Deficits

A situation where a country's total imports of goods, services, and transfers are greater than its total exports, indicating a nation is spending more abroad than it is earning.

Foreign Ownership

The situation where companies or assets are owned by investors or entities based outside the country in which the companies operate or the assets are located.