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Explain How Capital Structure of a Firm Conveys Information to Investors

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Essay

Explain how capital structure of a firm conveys information to investors.


Definitions:

Operate

The act of functioning or running a business or machine, carrying out actions necessary for performance.

Average Variable Cost

the total variable cost divided by the quantity of output produced; it shows the variable cost per unit of output.

Short Run

The short run is a period in which at least one factor of production is fixed, limiting the ability of a business to expand or reduce its output.

Shut Down

A temporary choice made by a company to halt manufacturing because of unsuitable market circumstances.

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