M&M Proposition 1 States That the Capital Structure of a Company

question 23

True/False

M&M Proposition 1 states that the capital structure of a company does not affect the required rate of return on a company's assets, while M&M Proposition 2 shows that the required rate of return on company's equity does change with capital structure decisions.

---

Definitions:

Liability

Financial obligations or debts owed by a business to external parties, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Goods

Tangible products or merchandise that are manufactured, bought, and sold in commerce.

Services

The action of helping or doing work for someone, often producing intangible benefits.

Unearned Revenue

Income received by an entity for services or products yet to be delivered or performed.