Which One of These Statements Is Correct

question 59

Multiple Choice

Which one of these statements is correct?

• A)Firms across all industries in the U.S.tend to have similar debt-to-equity ratios.
• B)The banking industry tends to have the lowest debt-to-equity ratio of any United States industry.
• C)Financial leverage lowers risk to equity holders.
• D)MM Propositions ignore bankruptcy costs.
• E)MM Propositions,without taxes,illustrate that a firm's overall cost of capital is affected by leverage.

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Definitions:

Expected Benefit Approach

A method used in accounting for pensions that allocates the cost of pensions over the years during which employees earn their pension benefits.

Discounted Present Value

A valuation method that calculates the current worth of a future cash flow, taking into account the time value of money.

Indefinite-Lived Intangibles

Non-physical assets without a fixed lifespan, such as trademarks or brand names, that a company does not amortize over time.

IFRS

International Financial Reporting Standards are a set of accounting standards developed by the International Accounting Standards Board, aiming at making global financial statements more comparable.