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Capital Structure Adjustment

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Questions and Answers

What could result in significant changes in a firm's book value equity?

A change in the general level of interest rates

A reduction in its default risk

A decrease in interest rates

High profits or losses (correct)

Why might a firm's debt's market value change?

Due to a decrease in the firm's default risk

Due to a change in the firm's profitability

Due to a change in the firm's market value

Due to a change in the general level of interest rates (correct)

What is a possible reason for a firm to deliberately take management actions to change its capital structure?

To increase its default risk

To move its actual capital structure towards its target (correct)

To reduce its profitability

To maintain its current market value

What is a potential outcome of a change in a firm's stock price?

<p>A change in its debt-to-equity ratio (A)</p> Signup and view all the answers

What is a possible way for a firm's capital structure to change without any deliberate management actions?

<p>Through changes in the market value of its debt and/or equity (C)</p> Signup and view all the answers

Capital Structure Adjustment

Choose a study mode

Podcast

Questions and Answers

What could result in significant changes in a firm's book value equity?

Why might a firm's debt's market value change?

What is a possible reason for a firm to deliberately take management actions to change its capital structure?

What is a potential outcome of a change in a firm's stock price?

What is a possible way for a firm's capital structure to change without any deliberate management actions?

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