Which of the Following Is/are Not True

question 37

Multiple Choice

Which of the following is/are not true?

• A)The more long-term debt in a firm's capital structure, the greater the risk that the firm will experience difficulty making the required payments when due.
• B)The more long-term debt in a firm's capital structure, the greater is the risk of default or bankruptcy.
• C)Financial analysts use the long-term debt ratio to assess risk related to long-term borrowing.
• D)The debt-equity ratio relates long-term debt to shareholders' equity, indicating the relative mix of long-term financing obtained from lenders versus owners.
• E)none of the above

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Definitions:

Flotation Costs

The costs incurred by a company when issuing new securities, including fees such as underwriting fees, legal fees, and registration fees.

Pre-Tax Cost

The cost of a service or product before taxes are taken into account.

Debt-Equity Ratio

A company's financial risk measure calculated by dividing all debts by the equity held by shareholders.