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.