The Basic Shortcoming of the EBIT-EPS Approach to Capital Structure

question 70

Multiple Choice

The basic shortcoming of the EBIT-EPS approach to capital structure is ________.

• A) that the optimal capital structure is difficult to compute
• B) its disregard for the presence of preferred stock in the capital structure
• C) its disregard for the firm's dividend policy
• D) that it concentrates on the maximization of EPS rather than the maximization of owner's wealth

Recognize the distinction between criminal and noncriminal forms of economic deviance related to high-status occupations.

Analyze the societal and legal responses to white-collar and corporate crimes.

Comprehend the complex nature of white-collar crime theories and the multi-factor approach towards explaining these crimes.

Distinguish the effects of ambiguous laws on the prevalence and prosecution of white-collar crimes.

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Definitions:

Common Stock

A type of equity security representing ownership in a corporation, with holders having voting rights and potentially receiving dividends.

Financing Activity

Activities that result in changes in the size and composition of the equity capital or borrowings of a company.

Financing Section

A section of the cash flow statement that shows the inflows and outflows of cash from financing activities, including borrowing, repaying debt, and issuing stock.