____ Would Be an Indication of Overspending

question 46

Multiple Choice

____ would be an indication of overspending.

• A) Your checks are bouncing.
• B) Collection agencies are calling you frequently .
• C) All your credit cards are charged up to their limits.
• D) You have no cash reserves and must borrow for incidentals.
• E) All of the above.

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Definitions:

Leverage

Use of borrowed capital for investment with the aim to multiply the potential returns, while also increasing the risk of loss.

Independence Hypothesis

In capital structure theory, the original restrictive model by Modigliani and Miller that shows stock price to be independent of capital structure.

Modigliani

Refers to Franco Modigliani, an economist known for his work on the Modigliani-Miller theorem, which addresses the valuation of stocks and corporate taxes.

Miller

Miller refers to the Miller Modigliani theorem or Miller's theory, which deals with the capital structure of a company and the relationship between the return required by investors and the company's equity and debt.