In the Context of Global Economic Systems,explain a Market Economy

question 57

Essay

In the context of global economic systems,explain a market economy.

---

Definitions:

Interest Tax Shield

The reduction in income taxes that results from the deductibility of interest expense from taxable income.

Capital Structure

The mix of debt and equity financing a company uses for its operations and growth.

Optimal Capital Structure

Optimal capital structure is the mix of debt, equity, and other financing sources that minimizes a firm's cost of capital and maximizes shareholder value, balancing risk and return.

Financial Distress

A situation where a company cannot meet or has difficulty paying off its financial obligations to creditors, often leading to bankruptcy or restructuring.