Which of the Following Statements Is CORRECT

question 40

Multiple Choice

Which of the following statements is CORRECT?

• A) Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in most other industries.
• B) Drug companies (prescription, not illegal!) generally have high debt-to-equity ratios because their earnings are very stable and, thus, they can cover the high interest costs associated with high debt levels.
• C) Wide variations in capital structures exist both between industries and among individual firms within given industries.These differences are caused by differing business risks and also managerial attitudes.
• D) Since most stocks sell at or very close to their book values, book value capital structures are almost always adequate for use in estimating firms' costs of capital.
• E) Generally, debt-to-total-assets ratios do not vary much among different industries, although they do vary among firms within a given industry.

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Definitions:

Patent Infringement

Unauthorized use, sale, or production of a patented invention without the patent holder's permission.

Genetically Modified Seeds

Seeds that have been altered using genetic engineering techniques to exhibit traits such as pesticide resistance or increased nutritional value.

Service Mark

A trademark used to identify and distinguish the services (rather than products) of one provider from those of others.

Trade Name

The name under which a business operates and is known to the public, different from its legal name.