Once a target capital structure for a firm is determined the firm ____.
A) does not allow the target to change.
B) uses it as guide for raising capital.
C) issues debt to lower leverage.
D) none of the above.

Question

Quizplus · Accepted Answer

Once a target capital structure is determined, the firm uses it as a guide for raising capital. The target capital structure may change over time due to various factors, such as changes in the business environment or the firm's financial needs, but it serves as a rough outline for the firm's overall capital structure goals. The firm may issue debt or equity accordingly to achieve the target capital structure, but it does not necessarily do so to strictly lower leverage.

Once a Target Capital Structure for a Firm Is Determined