What Should the Firm's Target Capital Structure Be Set to Do

question 20

Multiple Choice

What should the firm's target capital structure be set to do?

• A) Maximize the earnings per share (EPS).
• B) Minimize the cost of debt (r_d).
• C) Minimize the cost of equity (r_s).
• D) Minimize the weighted average cost of capital (WACC).

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Definitions:

Current Assets

Current Assets are assets that are expected to be converted into cash, sold, or consumed within one year or within a company’s operating cycle if longer than a year.

Accounts Receivable Turnover

A financial ratio indicating how many times a company's accounts receivable are collected during a specific period.

Net Sales

The amount of sales generated by a company after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Accounts Receivable

The money owed to a company by its customers for goods or services delivered or used but not yet paid for.