Capital structure

The term "capital structure" refers to:

• long-term debt, preferred stock, and common stock equity

• current assets and current liabilities.

• total assets minus liabilities.

• shareholders' equity.

The Modigliani Miller theorem, or the MM theory, is known for _____.

• Profits

• Working Capital

• Capital structure

• Operations

The Modigliani-Miller theorem is disregarded by economists because

• It's outdated

• IT's unrealistic and euphoric

• IT has been conclusively proven wrong

• all above

Financial Leverage means

• Increase in total earnings per share in the company 

• Maximising equity 

• Minimising debts 

• The balance between equity and debt 

When is financial leverage profitable? 

• When debts are lesser than equity

• When debts and equity are in balance 

• When the company is growing exponentially

• When the cost of capital decreases 

What is leverage?

• The concept of leverage states that till a certain point debt is not considered to be full-fledged liability. 

• Leverage is the increase in revenue per share for relation. 

• Leverage is used to portray an ideal situation in the case of a capital structure

• Leverage is referred to as a particular technique that is said to use debt instead of fresh equity in the process of purchasing an asset.

Which of the following was not an assumption for the MM theory

• No transaction costs

• Symmetry of information

• No taxes

• Firm is experiencing losses

"The market value of a company is calculated using its _____ and the risk of its underlying assets and that its value is ________ of the way it finances investments or distributes dividends"

• Earning power _ independent

• debt_independent

• Earning power _ Dependent

• Debt - dependent

The M&M theorem 2 states that ______ is directly proportional to the company's leverage level

• Cost of debt

• Cost of equity

• leverage

• market value

What is "Homemade Leverage"?

• The incurrence of debt by a corporation in order to pay dividends to shareholders

• The exclusive use of debt to fund a corporate expansion project

• The borrowing or lending of money by individual shareholders as a means of adjusting their level of financial leverage

• Best defined as an increase in a firm's debt-equity ratio