Which Statement Regarding Debt Is Correct,other Things Held Constant

question 17

Multiple Choice

Which statement regarding debt is correct,other things held constant?

• A)Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs; hence, they tend to use relatively little debt.
• B)An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.
• C)An increase in the company's degree of operating leverage is likely to encourage a company to use more debt in its capital structure.
• D)An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.