Which One of the Following Statements Is True

question 8

Multiple Choice

Which one of the following statements is true?

• A)A firm with low anticipated profits will likely take on a high level of debt.
• B)A successful firm will probably be all-equity financed.
• C)Rational firms raise debt levels when profits are expected to decline.
• D)Rational investors are likely to infer a firm is more valuable when its debt level declines.
• E)Investors will generally view an increase in debt as a positive sign for the firm's future value.

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Definitions:

Statistical Tool

Software or methods used for the analysis, interpretation, and visualization of statistical data.

Causality

The relationship between cause and effect where one variable causes the change in another.

Multiple Regression

An approach in statistics where multiple predictors are used to estimate the outcome of a target variable.

Path Analysis

A specialized type of structural equation modeling used to describe directed dependencies among a set of variables, suitable for analyzing complex causal relationships.