According to the Static Capital Structure Theory

question 11

Multiple Choice

According to the static capital structure theory:

• A)because of their preference to finance investment from retained earnings,firms avoid debt and adapt their dividend policies to reflect their anticipated investment needs.
• B)if the firm has excess cash,it will tend to pay off its debt prior to repurchasing shares.
• C)firms weigh the costs of having too much debt when they are doing poorly against the tax benefits of debt when they are doing well to arrive at their optimal capital structures.
• D)if external financing is required; firms tend to issue the safest security first.