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Capital Structure Quiz

Authored by Arun SCS

Financial Education

University

Used 1+ times

Capital Structure Quiz
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20 questions

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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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