Firms Often Have Suboptimal Capital Structures Because

question 71

Multiple Choice

Firms often have suboptimal capital structures because

• A) their managers do not understand the theory of optimal capital structure.
• B) some business owners think their firm will never become insolvent.
• C) firms are affected differently by bankruptcy and agency costs.
• D) some firms do not pay taxes.
• E) operating leverage is more important than financial leverage in some firms.

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Definitions:

Noble Experiment

A term that refers to the period of prohibition in the United States during the 1920s and early 1930s intended to reduce crime and corruption, improve health, and improve social morals.

Americans

Citizens of the United States of America or pertaining to the country itself.

Harlem Renaissance

An African American cultural movement in the 1920s and 1930s centered in Harlem, New York City, noted for its contributions to music, literature, and art.

African American Intellectuals

Scholars, writers, and thinkers of African American descent who have contributed to a variety of fields and to the intellectual discourse on race, culture, and society.