In Examining the Question as to Whether or Not Capital

question 95

Multiple Choice

In examining the question as to whether or not capital structures are randomly selected,we generally find that:

• A) capital structures show strong industry patterns.
• B) within industries, the most profitable companies borrow the least.
• C) corporate and personal income taxes influence capital structures, but taxes alone cannot explain differences in leverage across firms, industries or countries.
• D) shareholders consider leverage-increasing events to be "good news" and leverage-decreasing events to be "bad news."
• E) All of the above

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Definitions:

Depreciable Asset

An asset subject to depreciation, representing the decline in value over time due to use, wear and tear, or obsolescence.

Investing Activities

Financial activities related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Operating Activities

Activities that constitute the primary or main activities of a business, such as sales and service delivery, which are reflected in the company's cash flow.

Indirect Method

A way of reporting cash flows from operating activities on the cash flow statement where net income is adjusted for changes in balance sheet accounts to convert it from accrual to cash basis.