Which Statement Is FALSE Regarding Empirical Evidence of Capital Structures

question 56

Multiple Choice

Which statement is FALSE regarding empirical evidence of capital structures?

• A) Capital structures show strong industry patterns.
• B) Economy wide leverage ratios are consistent across countries.
• C) Leverage ratios are negatively related to the cost of financial distress.
• D) Within industries,the most profitable companies borrow the least.

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Definitions:

Noncash Assets

Assets that cannot be easily converted into cash, such as equipment, real estate, and intellectual property.

Capital Balances

The sum of funds invested by owners in a business along with any accumulated profits or losses.

Loss On Realization

Loss on realization occurs when the proceeds from the sale of an asset are less than its carrying amount on the books, leading to a financial loss.

Deficit

The amount by which expenditures exceed income or costs outstrip revenues, resulting in a negative balance.