Managers Should Not Change the Capital Structure Unless It Departs

question 94

Multiple Choice

Managers should not change the capital structure unless it departs significantly from the optimal level because such a change would

• A)reduce dividends.
• B)change incentives of stakeholders.
• C)incur transactions costs.
• D)increase fixed costs.

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Definitions:

Stimulus

An external event or change in the environment that can elicit or influence a physiological or psychological response.

Negative Punishment

The removal of a desirable stimulus following unwanted behavior in order to decrease the likelihood of that behavior happening again.

Fender Bender

A minor car accident primarily resulting in cosmetic damage to the vehicle, without significant injuries to the involved parties.

Positive Punishment

The addition of an undesirable stimulus to decrease a behavior, such as adding chores for breaking rules.