The Overriding Objective of the Capital Structure Decision Should Be

question 124

True/False

The overriding objective of the capital structure decision should be to choose the level of debt that results in the largest possible share price.

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Definitions:

MR = MC

A condition in economics where the marginal revenue (MR) of producing one more unit of a good matches the marginal cost (MC) of producing that unit, used in determining the optimum production quantity.

Profit-maximizing Level

The point of production at which a firm achieves its highest possible profit, determined by equating marginal cost and marginal revenue.

Perfectly Elastic

Perfectly elastic describes a situation where the quantity demanded or supplied changes infinitely in response to any change in price, represented by a horizontal demand or supply curve.

Industry Supply

The total output of a specific good or service produced by all firms in an industry at various price levels.