In General, a Firm's Theoretical Optimal Capital Structure Is That

question 213

True/False

In general, a firm's theoretical optimal capital structure is that which balances the tax disadvantage of debt financing against the increase probability of bankruptcy that results from its use.

---

Definitions:

Positively Related

A relationship between two variables where an increase in one variable is associated with an increase in the other.

Negatively Related

Negatively Related indicates a relationship where one variable increases while the other decreases, or vice versa, showing an inverse correlation.

Extrinsic Motivation

Motivation driven by external rewards such as money, praise, or avoiding negative consequences, rather than intrinsic satisfaction.

Intrinsic Motivation

A driving force that inspires individuals to engage in activities for their own sake, due to the personal satisfaction or pleasure they derive, rather than for external rewards.