The Static Theory of Capital Structure Assumes a Firm

question 87

Multiple Choice

The static theory of capital structure assumes a firm:

• A)maintains a constant debt-equity ratio.
• B)has an all-equity structure.
• C)is fixed in terms of its assets.
• D)pays no taxes.
• E)is operating at the point where financial distress costs are eliminated.

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Definitions:

Seller

refers to an individual or entity that offers goods or services for sale to consumers or other businesses.

Merchant

An individual or business engaged in the selling of goods or services, especially those involved in wholesale or retail trade.

Risk of Loss

Refers to the financial and legal responsibility for damage, destruction, or loss of goods, usually determined by the terms of sale like F.O.B.

Identification

The act of identifying or confirming the identity of an individual or object.