Which Statement Is FALSE Concerning Capital Structure

question 80

Multiple Choice

Which statement is FALSE concerning capital structure?

• A) Firms with large amounts of tangible assets tend to use a lot of debt in their capital structures.
• B) When corporate profits are taxed at the corporate and personal level,the benefits of leverage are greatly reduced.
• C) Modern trade off theory predicts that a firm's optimal debt level is set by trading off the tax benefits of leverage against the agency costs of increased debt.
• D) Debt is used more frequently abroad (such as Germany and England)as international laws tend to favor debtors.

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Definitions:

Population's Standard Deviation

A measure of the dispersion or spread of scores within a given population, indicating the average distance from the mean.

Observed Z Value

The value resulting from a Z-test statistic used in hypothesis testing, representing how many standard deviations an observation is from the mean.

Sample Mean

The average value of a set of numbers in a sample taken from a larger population. It is used to estimate the population mean.

Population Average

The population average is the mean value of a particular characteristic for the entire population, providing a central tendency measure of that characteristic.