Recent Lessons

Show all results for ""

Feature Overview

Ace your exams with our all-in-one platform for creating and sharing quizzes and tests.

Quizzes

Create quizzes and tests automatically from your content using AI.

Flashcards

Automatically turn your notes into digital flashcards.

Share, Export & Embed

Share with classmates or export to Excel and your learning management system.

Stats & Reporting

Auto-grading quizzes and tests with detailed stats and reports.

Mobile Apps

The smarter way to study – wherever you are.

Pricing

Search...

5 Questions

0 Views

Capital Structure Factors

Choose a study mode

Play Quiz

Study Flashcards

Spaced Repetition

Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary reason why equity shareholders may prefer debt financing over issuing additional equity shares?

To reduce the firm's financial risk

To avoid diluting their control over the firm (correct)

To increase the firm's business risk

To increase the firm's earnings per share

Which of the following is a result of using debt financing, according to the concept of financial risk?

Increase in the firm's return on equity

Additional risk placed on the ordinary equity shareholders (correct)

Decrease in the firm's earnings per share

Reduced business risk of the firm

When is debt financing preferable to equity financing from the earnings per share (EPS) point of view?

When the earnings before income tax (EBIT) is low

When the earnings before income tax (EBIT) is high (correct)

When the return on equity (ROE) is high

When the return on assets (ROA) is less than the cost of debt

What is the result of financial leverage when the return on assets (ROA) is less than the cost of debt?

<p>Depresses return on equity (ROE)</p> Signup and view all the answers

Which of the following factors is considered in capital structure decisions due to its impact on the firm's earnings per share and return on equity?

<p>Income</p> Signup and view all the answers

Capital Structure Factors

Choose a study mode

Podcast

Questions and Answers

What is the primary reason why equity shareholders may prefer debt financing over issuing additional equity shares?

Which of the following is a result of using debt financing, according to the concept of financial risk?

When is debt financing preferable to equity financing from the earnings per share (EPS) point of view?

What is the result of financial leverage when the return on assets (ROA) is less than the cost of debt?

Which of the following factors is considered in capital structure decisions due to its impact on the firm's earnings per share and return on equity?

More Like This

Capital Structure Theories Quiz

Capital Structure Policy in Financial Management

Business Finance Fundamentals

Capital Structure Adjustment

Upgrade to continue