When a Firm Alters Its Capital Structure to Include More

question 18

Multiple Choice

When a firm alters its capital structure to include more or less debt (and, in turn, less or more equity) , it impacts which of the following?

• A) the residual cash flows available for stockholders
• B) the number of shares of stock outstanding
• C) the earnings per share (EPS)
• D) all of these choices are correct.

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Definitions:

Bond Prices

The market price at which a bond is traded, reflecting various factors including interest rates, market demand, and the bond's credit quality.

Debt Restructuring

The process by which terms of an existing debt are modified, often involving the reduction of the debt and/or extension of payment terms.

Common Stock

Represents equity ownership in a corporation, providing holders with voting rights and a share in the company's profits through dividends.

Note Payable

A written agreement to pay a certain sum of money, typically with interest, at a future date.