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:

Cash Management

Cash management involves the collection, handling, and usage of cash. It aims to manage a company's short-term financial stability and liquidity.

Adequate Liquidity

The ability of an entity to meet its short-term financial obligations with its readily available assets.

Accounts Receivable Factor

A financial transaction where a company sells its accounts receivable to a third party (factor) at a discount, to obtain immediate cash.

Bad Debt Risk

The risk that money owed to a company by debtors will not be paid and thus become a bad debt.