If Company Earnings Give a Rate of Return Less Than

question 96

Multiple Choice

If company earnings give a rate of return less than the cost of debt,then it may be advantageous for the firm to be ________.

• A)all-equity
• B)owned mostly by debt holders
• C)half owned by debt holders
• D)one-third owned by equity holders

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Definitions:

Mixed Regime

A form of government that combines elements of democracy, oligarchy, and monarchy, theoretically balancing the principles of freedom, equality, and stability.

Montesquieu

A French political philosopher of the Enlightenment who articulated the theory of separation of powers, a foundation for many modern democratic governments.

Judicial Review

The power of courts to assess whether a law or governmental action is consistent with the Constitution and, if not, to declare it invalid.

Federalism

A political system that combines a general government (the federal or national government) with regional governments (states or provinces) in a single political system.