The Optimal Capital Structure Is That Capital Structure Which Strikes

question 5

True/False

The optimal capital structure is that capital structure which strikes a balance between risk and return such that the firm's stock price is maximized.

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Definitions:

Opportunity Cost

The most valuable alternative that is given up if a particular investment is undertaken.

Incremental Cost

The additional cost incurred to produce one more unit of a product or service.

Accounts Receivables

The money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Cash Inflows

Money or value entering a company, often from operations, financing, or investing activities, contributing to the company's cash position.