The Optimal Capital Structure of a Firm

question 73

Multiple Choice

The optimal capital structure of a firm

• A) minimizes the cost of financing a firm's projects.
• B) minimizes interest payments to creditors.
• C) maximizes firm value.
• D) both a and c.

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Definitions:

Fixed Expenses

Costs that do not change in total regardless of changes in the volume of production or sales.

Operating Results

A summary of a company's financial performance over a specified period, focusing on revenue, expenses, and net income.

Unit Variable Cost

The cost associated with producing one additional unit of product, which can include materials, labor, and other costs that vary directly with production volume.

Marketing Manager

A professional responsible for planning, directing, and orchestrating a company's marketing policies and campaigns to increase brand awareness and sales.