According to MM, If Individuals Cannot Obtain the Same Borrowing

question 57

Multiple Choice

According to MM, if individuals cannot obtain the same borrowing terms as firms, then:

• A) capital structure may be relevant.
• B) capital structure may be irrelevant.
• C) individuals should not invest in levered firms.
• D)firms should increase their payments to individuals.

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Definitions:

Receivable Turnover

A financial metric indicating the efficiency of a company in collecting its accounts receivable or the effectiveness of its credit policy.

Inventory Turnover

A metric representing the frequency at which a business's stock is sold and restocked within a given timeframe, reflecting how effectively inventory is handled.

Current Ratio

An indicator of how well a company can handle its immediate debts, assessing its ability to cover obligations maturing in one year or less.

Acid-test Ratio

A financial metric that measures a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventory.