All Else the Same, Firms Facing Relatively High Tax Rates

question 88

Multiple Choice

All else the same, firms facing relatively high tax rates should:

• A)use more debt.
• B)use less debt.
• C)have lower E/E ratios.
• D)none of the options.

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Definitions:

Current Asset

Short-term assets that are expected to be converted into cash within one year or within the business's operating cycle.

Shareholders' Equity

Refers to the residual interest in the assets of a corporation after deducting liabilities, indicating the net worth available to shareholders.

Liquid Asset

An asset that can easily and quickly be converted into cash without significantly impacting its value.