Once a Target Capital Structure for a Firm Is Determined

question 106

Multiple Choice

Once a target capital structure for a firm is determined the firm ____.

• A) does not allow the target to change.
• B) uses it as guide for raising capital.
• C) issues debt to lower leverage.
• D) none of the above.

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Definitions:

Artificially Scarce Goods

Products or services whose availability is limited by the seller to increase demand or price, rather than by natural scarcity.

Natural Monopolists

Entities that dominate a market due to inherent advantages, such as economies of scale, which prevent efficient competition.

Average Total Costs

The total of all costs associated with production divided by the number of units produced, giving the cost per unit.

Marginal Cost

The additional expense required to produce or supply one extra unit of a product.