Which of the Following Statements Is Correct

question 24

Multiple Choice

Which of the following statements is correct?

• A) The use of debt in the capital structure results in tax benefits to the firm.
• B) Debt is referred to as "financial leverage" because it magnifies returns to shareholders.
• C) Debt management ratios evaluate whether a firm is financing its assets with a reasonable amount of debt versus equity financing.
• D) All of these choices are correct.

---

Definitions:

Peace and Quiet

signifies a state of tranquility and serenity, often desired by individuals seeking relief from stress or chaos.

Home Business

A business operated from the owner's residence, often characterized by lower overhead costs and flexible working hours.

Coase Theorem

A principle that asserts under conditions of no transaction costs and well-defined property rights, parties will negotiate to correct externalities and allocate resources efficiently.

Bargaining Costs

Costs incurred during the process of reaching an agreement between two parties, typically including time, effort, and other resources spent in negotiation.