Which of the following statement is consistent with the trade-off theory?
A) More profitable companies pay more tax, so they should use more debt to take advantage of the interest tax shield.
B) The more profitable a company is, the less debt it tends to have.
C) None of the above.
D) All of the above.

Question

Quizplus · Accepted Answer

Under the trade-off theory, more profitable companies pay more tax, so they should use more debt to take advantage of the interest tax shield.

Which of the Following Statement Is Consistent with the Trade-Off