
Capital Structure Quiz

Quiz
•
Financial Education
•
University
•
Hard
Arun SCS
Used 1+ times
FREE Resource
20 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following best defines capital structure?
Combination of assets and liabilities
Mix of long-term debt and equity used by a firm
Total assets used in the business
Working capital decisions
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
According to Modigliani-Miller (MM) Proposition I (without taxes), the value of the firm is:
Dependent on its capital structure
Maximized with more debt
Independent of its capital structure
Minimum with zero debt
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Under the Trade-Off Theory, a firm should borrow up to the point where:
Tax savings from debt equals bankruptcy cost
Debt is zero
Debt equals equity
Interest is less than dividend
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following is a feature of Pecking Order Theory?
Firms prefer debt over equity
Firms prefer equity over debt
Firms have no order in financing
Firms prefer internal financing first
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which component is not considered in calculating WACC?
Cost of debt
Cost of equity
Return on assets
Tax rate
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Business risk is associated with:
Changes in tax rates
Changes in operating income
Changes in capital structure
Changes in dividend policy
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Financial leverage primarily affects a firm's:
Sales volume
Operating profit
Earnings per share
Working capital
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