Optimal Capital Structure Is the Capital Structure at Which the Weighted

question 173

True/False

Optimal capital structure is the capital structure at which the weighted average cost of capital is minimized, thereby maximizing the firm's value.

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Definitions:

Warranty Expense

It represents the cost associated with the repair or replacement of defective products under warranty.

Journal Entry

A record in the accounting journal that consists of a debit and credit entry and describes a business transaction.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated by dividing current assets by current liabilities.

Working Capital

The gap between a firm's immediate assets and its short-term obligations, reflecting the funds available for daily operations.