Which of the following statements is correct regarding capital structure theories? Select one:a.Capital Structure is the mix or proportion of a firm’s permanent long-term financing represented by debt and preferred stock onlyb.Modigliani and Miller approach states that the financing decision of a firm affects the market value of a firm in a perfect capital market.c.Traditional approach is known as the intermediate approach synonymous d.The capital structure decision is irrelevant to the valuation of the firm in the net income approach

Which capital structure theory argues that there is an optimal level of debt for a firm?a.Net income approachb.Net operating income approachc.Traditional approachd.Modigliani-Miller model

Which of the following is NOT a capital structure theory?a.Net income approachb.Net operating income approachc.Traditional approachd.Weighted average cost of capital (WACC) approach

Capital Structure is an optimal mix of which one of the following options

Which of the following statements about capital structure are correct? Select ALL correct answers.A company should always finance its business using as much debt as possible in order to optimize the capital structure.Having too little debt may increase the risk of default in repayment.A company needs to consider the current economic climate when making decisions on debt and equity proportions.Having too much equity may dilute earnings and the value of the original investors.

he net income approach to capital structure theory suggests that the value of a firm is maximized when:a.The debt-equity ratio is zerob.The debt-equity ratio is maximizedc.The debt-equity ratio is minimizedd.The debt-equity ratio is equal to one