Which of the Following Statements Is True Regarding the Trade-Off

question 62

Multiple Choice

Which of the following statements is true regarding the trade-off theory?

• A) Target debt ratios are similar among firms in the same industry.
• B) Riskier firms tend to rely mostly on debt financing.
• C) Riskier firms should have high target debt ratios.
• D) Less risky firms ought to have a greater amount of debt financing.

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Definitions:

Atomic Bomb

A weapon of mass destruction that releases its destructive energy through nuclear reactions of fission or fusion, causing significant devastation and loss of life.

Hydrocarbons

Organic compounds composed entirely of hydrogen and carbon, commonly found in fossil fuels and used as a primary energy source.

Nonrenewable Fossil Fuels

These are fuels like coal, oil, and natural gas, derived from the decomposed remains of plants and animals, that cannot be replenished within a human time scale.

Anthracite Coal

The highest grade of coal, known for its high carbon content, low volatility, and high energy content, used primarily for heating and in industrial processes.