According to the Trade-Off Theory, the Capital Structure Is a Trade-Off

question 77

Multiple Choice

According to the trade-off theory, the capital structure is a trade-off between:

• A)Tangible and intangible asset risk
• B)High and low target debt ratios
• C)Tax savings and financial distress costs
• D)Tax shields and equity financing

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Definitions:

Net Operating Income

The profit generated from a company's usual business operations, excluding taxes and interest.

Division's

Relates to a section or branch of a company that operates semi-independently and focuses on a particular product line, market segment, or geographical area.

ROI

Return on Investment, a metric used to evaluate the efficiency of an investment or compare the efficiency of several investments.

Investment Opportunity

A situation or venture that has the potential to generate a return on investment.