Which of the Following Is a Reasonable Conclusion from the Trade-Off

question 61

Multiple Choice

Which of the following is a reasonable conclusion from the trade-off theory of capital structure?

• A)A high debt ratio will result in a maximum price of a firm's ordinary shares.
• B)A firm's ordinary share price will not be affected by the amount of debt a firm uses.
• C)A low debt ratio will result in a maximum price for a firm's ordinary shares.
• D)Modest levels of debt have a more favorable impact on a firm's average cost of capital and share price than no debt.

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Definitions:

Socialized Power

Power used by leaders for the benefit of others or the organization, rather than for personal gain, fostering community and organizational well-being.

Charismatic Leader

A person who inspires followers with charm, vision, and magnetism, exerting a strong emotional impact.

Idealized Self

An individual's conception of themselves in an ideal form, often embodying values, traits, and abilities that they aspire to.

Personal Identification

The process of recognizing and verifying an individual's identity through various means.