If a Firm Chooses to Maintain a Fixed Debt-Equity Ratio

question 69

Multiple Choice

If a firm chooses to maintain a fixed debt-equity ratio, they can raise the additional needed funds by:

• A)Issuing debt, in which case dividends become the balancing item
• B)Issuing debt, in which case the amount of debt itself becomes the balancing item
• C)Issuing stock, in which case dividends become the balancing item
• D)Issuing stock, in which case no balancing item is needed

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Definitions:

Automatic Processing

The unconscious encoding of incidental information such as space, time, and frequency, and of well-learned information.

Memory

The faculty by which the mind stores and remembers information.

Sensory Encoding

The process by which sensory information is translated into a form that can be utilized by the brain's neural system.

Semantic Network Model

A cognitive model proposing that mental concepts are organized within the brain in networks of interconnected ideas.