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.

---

Definitions:

Needs Cluster

A group of needs that are related or similar, often used in psychology to understand complex human motivations.

Needs Categories

The classification of human necessities and desires into a hierarchy or specific groupings, such as Maslow's hierarchy of needs.

ERG Theory

A motivational theory developed by Clayton Alderfer that outlines three core human needs: Existence, Relatedness, and Growth.

Maslow's Needs

Maslow's Needs represent a hierarchy of human needs proposed by Abraham Maslow, which posits that people are motivated by unsatisfied needs, and certain lower needs need to be satisfied before higher needs can be addressed.