Business Finance

Business

Quiz 12 :
Principles of Capital Structure

Quiz 12 :
Principles of Capital Structure

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All companies are subject to:
Free
Multiple Choice
Answer:

Answer:

C

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If a company is financed entirely by equity then variations in the return to shareholders are attributable only to:
Free
Multiple Choice
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Answer:

B

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Financial leverage is the relationship between:
Free
Multiple Choice
Answer:

Answer:

A

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MM Proposition I states that:
Multiple Choice
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The chance that a borrower will fail to meet obligations to pay interest and principal as promised is known as:
Multiple Choice
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MM Proposition II is based on the:
Multiple Choice
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A company is said to be in a state of financial distress:
Multiple Choice
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Which theory proposes that companies have an optimal capital structure based on a trade-off between the benefits and costs of using debt?
Multiple Choice
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Which theory proposes that companies follow a hierarchy of financing sources?
Multiple Choice
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A company with low financial leverage,large reserve borrowing capacity and few profitable investment opportunities is likely to:
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Financial risk comes about when:
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Financial leverage exposes shareholders to financial risk because:
Multiple Choice
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Which of the following statements on financial leverage is true?
Multiple Choice
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Calculate EPS if a company,with 1 million shares with a market price of $4 each and zero debt,decides to buy back 25 per cent of its outstanding shares by borrowing at 10% p.a.Assume current earnings are $0.4 million and taxes do not apply.
Multiple Choice
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Which of the following is true of debt?
Multiple Choice
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Which of the following statements is false?
Multiple Choice
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When considering a firm's capital structure,a financial manager must:
Multiple Choice
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Under the MM theorem,capital structure will not change the total value of a firm because:
Multiple Choice
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A key assumption of the MM arbitrage argument is:
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Arbitrage refers to:
Multiple Choice
Answer:
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