Capital Structure Multiple Choice Questions

The primary objective of the manager is to please the stockholder by maximizing stockholder wealth.

Debt capital: borrowing someone else’s money to finance the business under the condition that the money plus accrued interest must be paid back in full by an agreed upon date in the future

leverage increases, interest rate on the total debt will increase. The Company is considering the

C. all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.

b. Needs for liquidity (for example, due to the withdrawal of deposits, increased demand for loans, surrender of insurance policies, or payment of insurance claims)

Borrowing. To borrow money from any lender (including my executor individually), extend or renew any existing indebtedness, and mortgage or pledge any property;

c. Modification of terms of a debt, such as one or a combination of any of the following:

3) Specialization in lending helps to reduce an asymmetric information problem in lending, (1) describe the problem. (2) What are the advantages/disadvantages of specializing?

b. The fair value of a liability cannot differ from the amount appearing on the balance

For example, you are in a case where you have permission to take out a personal loan from a bank, credit union, or credit lending institution peer-to-peer.

f) Subordinate debenture has a claim on assets in the event of bankruptcy only after senior debt has been paid off. In

firm’s financing, for example, issuing or repurchasing stock and borrowing or repaying loans. It also

The purpose of the report is to understand the capital structure of the chosen company on the basis of the financial statements of the company which includes the income statement, balance sheet and the cash flow statement of the company and do the capital analysis of the company as well to find out the advantages and disadvantages in working capital of the company and suggest company logical and useful ways for growing their economy.

There is a point in the D/E ratio (usually high) where holders of the risky debt begin to bear part of the firm's operating risk. This happens because as the company acquires more debt, more of that risk is relocated from stockholders to bond holders.

In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm 's capital structure is then the composition or 'structure ' of its liabilities. Simply, capital structure refers to the mix of debt and equity used by a firm in financing its assets. The capital structure decision is one of the most important decisions made by financial management. The capital structure decision is at the center of many other decisions in the area of corporate finance. These include dividend policy, project financing, issue of long term securities, financing of mergers, buyouts and so on. One of the many objectives of