Which of the Following Statements Is Consistent with the Trade-Off

question 5

Multiple Choice

Which of the following statements is consistent with the trade-off theory?

• A)Costs of financial distress are likely to be most serious for companies with significant intangible assets.
• B)A negative relationship exists between leverage and profitability.
• C)Companies with mostly intangible assets are likely to borrow more.
• D)A positive relationship exists between leverage and non-debt tax shields.

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Definitions:

Social Media

Social media are digital platforms that facilitate the creation and sharing of information, ideas, personal messages, and other content via virtual communities and networks.

Social Cause

A broad issue or movement that exists within society aimed at implementing change or achieving a specific outcome benefiting the public.

Rationale

The underlying reason or logic behind a decision, action, or belief.

Social Distance

The physical or psychological space between individuals or groups, which can affect their interaction and perception of intimacy or connectedness.