Firms That Maintain a Constant Ratio of Debt-Equity Over a Variable

question 77

Multiple Choice

Firms that maintain a constant ratio of debt-equity over a variable business cycle may find that:

• A)Debt has grown too large, too fast
• B)It is more difficult to maintain a stable dividend
• C)Debt covenants always accommodate more debt, but often prevent debt prepayment
• D)Equity is always less expensive to obtain than debt

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Definitions:

Pharmacological Effects

The physical and psychological outcomes resulting from the interaction between a drug and the body, including therapeutic benefits and side effects.

Lithium

A chemical element used primarily in psychiatric medication to treat mood disorders such as bipolar disorder.

Bipolar Disorder

A disorder in mental health featuring intense fluctuations in mood from very elevated states (mania or hypomania) to very low states (depression).

Therapeutic Drugs

Medications used to treat, cure, or prevent disease and maintain health.