Which of the Following Statements Is Not True Regarding Miller's

question 1

Multiple Choice

Which of the following statements is not true regarding Miller's analysis?

• A)There is an optimal debt/equity ratio for the corporate sector.
• B)There is no optimal debt/equity ratio for individual companies.
• C)Shareholders benefit from the tax saving of interest on debt.
• D)Securities issued by different companies will appeal to different clientele.

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Definitions:

Fixed Costs

Costs that do not vary with the level of output or activity, remaining constant over a period.

Break-Even Point

The sales volume at which net income is zero; the intersection of the total cost and total revenue lines on a break-even chart.

Break-Even Point

The point at which costs or expenses and revenue are equal, resulting in no net loss or gain from a business or investment.

Variable Cost

Variable cost is the cost that changes in direct proportion to the volume of output or activity in production, services, or other cost-incurred activities.