Which One of the Following Statements Is TRUE

question 30

Multiple Choice

Which one of the following statements is TRUE?

• A) It's far more difficult to keep old customers than to attract new ones.
• B) It's far more expensive to attract new customers than to keep older ones.
• C) It's about the same in terms of expense to attract new customers and keep older ones.
• D) It's far more expensive to keep older customers than to attract new ones.
• E) It's cheap to attract new customers and keep older ones.

---

Definitions:

Static Theory of Capital Structure

A theory that proposes there is an optimal capital structure for a company where the cost of capital is minimized, and the value of the firm is maximized.

Tax Benefit

A reduction in tax liability achieved through claiming allowable deductions such as expenses, exemptions, and credits.

Financial Distress

A situation where a company is unable to meet its financial obligations, which can lead to bankruptcy if not addressed.

Homemade Leverage

A strategy where investors adjust the leverage in their own investment portfolio, rather than relying on the leverage employed by the companies in which they own shares.