A Decrease of Debt in the Capital Structure Tends to Reduce

question 70

Multiple Choice

A decrease of debt in the capital structure tends to reduce a firm's EPS when the firm:

• A)Faces high interest rates
• B)Faces strong growth in business conditions
• C)Pays taxes
• D)Does not reinvest its earnings

---

Definitions:

Low-Ball Technique

Influence technique based on commitment, in which one first gets a person to comply with a seemingly low-cost request and only later reveals hidden additional costs.

Door-In-The-Face Technique

Influence technique based on reciprocity, in which one starts with an inflated request and then retreats to a smaller request that appears to be a concession.

Labeling Technique

Influence technique based on consistency, in which one assigns a label to an individual and then requests a favor that is consistent with the label.

Self-Fulfilling Prophecy

A forecast that, either directly or indirectly, ensures its own accuracy through a positive loop between what is believed and how one acts.