Based Upon the "Trade-Off Theory" of Capital Structure, What Differences

question 62

Multiple Choice

Based upon the "trade-off theory" of capital structure, what differences might you expect in the capital structure of a food producer and a defence contractor?

• A)Higher debt-equity ratio for food producer
• B)Higher debt-equity ratio for defence contractor
• C)Neither firm should use debt in their structure
• D)Differences in capital structure will make no valuation differences in these firms

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Definitions:

Medication

substances used to diagnose, treat, cure, or prevent disease and alleviate symptoms.

Milligrams

A unit of mass or weight in the metric system, equal to one thousandth of a gram, commonly used to measure small quantities of material.

Grams

A unit of mass in the metric system, equal to one-thousandth of a kilogram.

Tablespoon

A unit of measure used in cooking, equal to approximately 15 milliliters or half an ounce.