Firms with tangible long-term assets and predictable cash flows, such as electric utilities, tend to have balance sheets with a
A)high proportion of long-term debt (80% or more).
B)low proportion of long-term debt (20% or less).
C)high proportion of shareholders' equity (80% or more).
D)high proportion of cash (80% or more).
E)high proportion of retained earnings (80% or more).

Question

Quizplus · Accepted Answer

Firms with tangible long-term assets and predictable cash flows, like electric utilities, often use a high proportion of long-term debt in their capital structure. This is because they can reliably service the debt due to their stable cash flows, and they have tangible assets to serve as collateral.

Firms with Tangible Long-Term Assets and Predictable Cash Flows, Such