The Optimal Capital Structure for Firms in Cyclical Industries Should

question 48

Multiple Choice

The optimal capital structure for firms in cyclical industries should contain ________ than firms in stable industries.

• A) more debt
• B) less debt
• C) an equal amount of debt
• D) None of these options are valid. There is no relationship between the cyclical nature of an industry and optimal capital structure.

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Definitions:

Manufacturing Department

A specific division within a company where goods are produced, focusing on the transformation of raw materials into finished products.

Absorption Costing

An accounting method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed manufacturing overhead — in the cost of a product.

Operating Income

A measure of a company's profit that excludes non-operating expenses and revenues, focusing solely on the income generated from its core business operations.

Inventory Levels

The quantity of goods and materials on hand at a particular time within a company.