This quiz works best with JavaScript enabled. Home > Corporate Finance > Capital Structure – Quiz 11 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Capital Structure Quiz 11 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What is the one reasons why capital structure change over time? A) Market Actions. B) Company Size. C) Operating Leverage. D) None of above. Show Answer Correct Answer: A) Market Actions. 2. What are the disadvantages of having a high debt-to-equity ratio in capital structure, according to Aanya, Alisha, and Aarav? A) Decreased financial risk, lower interest expenses, ease in obtaining financing, and no impact on credit rating. B) Decreased financial risk, lower interest expenses, ease in obtaining financing, and positive impact on credit rating. C) The disadvantages of having a high debt-to-equity ratio in capital structure include increased financial risk, higher interest expenses, difficulty in obtaining financing, and negative impact on credit rating. D) No disadvantages, high debt-to-equity ratio is always beneficial. Show Answer Correct Answer: C) The disadvantages of having a high debt-to-equity ratio in capital structure include increased financial risk, higher interest expenses, difficulty in obtaining financing, and negative impact on credit rating. 3. The optimal value of debt, occurs when the value of the firm is maximized. The statement above is true or false. A) True. B) False. Show Answer Correct Answer: A) True. 4. According to tradeoff theory, the total value of a levered firm equals the value of the firm without leverage plus the present value of the ....., less the present value of ..... A) Interest payment, financial cost. B) Financial cost, interest payment. C) Financial distress cost, interest tax shield. D) Interest tax shield, financial distress cost. Show Answer Correct Answer: D) Interest tax shield, financial distress cost. 5. The proportion of debt in the overall capital is also called ..... A) Capital Structure. B) Financial Leverage. C) Trading On equity. D) Cost of funds. Show Answer Correct Answer: B) Financial Leverage. 6. A firm requires an investment of $ 80, 000 and borrows $ 20, 000 at 9%. If the return on equity is 15% and the tax rate is 30%, what is the firm's WACC? A) 13.825%. B) 12.825%. C) 14.825%. D) 11.825%. Show Answer Correct Answer: B) 12.825%. 7. Which of the following cannot be registered capital on the day of establishment of the enterprise? A) Building cash products. B) Land use building vehicles. C) Labor. D) All items can be assembled. Show Answer Correct Answer: C) Labor. 8. Value of the firm (V firm) is Value of the debt (V debt) + ..... A) V revenue (value of the revenue). B) V expense (value of the expense). C) V assets (value of the assets). D) V equity (value of the equity). Show Answer Correct Answer: D) V equity (value of the equity). 9. ..... is the owner of the asset in a lease agreement A) Lessee. B) Lessor. C) Tenant. D) Service Lease. Show Answer Correct Answer: B) Lessor. 10. A theory which asserts that there is an optimal capital structure or at least an optimal range of structures for every firm. A) The Traditional Approach. B) The MM Approach. C) The Contemporary Approach. D) None of above. Show Answer Correct Answer: C) The Contemporary Approach. 11. Many factors can affect the future tax savings from interest. Typically, the level of future interest payments varies due to:i. Changes the firm makes in the amount of debt outstanding, ii. Changes in the interest rate on that debt, iii. Changes in the firm's marginal tax rate, and iv. The risk that the firm may default and fail to make an interest payment. A) I, ii, iii. B) I, iii, iv. C) Ii, iii, iv. D) All of the above. Show Answer Correct Answer: D) All of the above. 12. Explain the concept of optimal capital structure to Anika, Siya, and Akhil. A) Optimal capital structure refers to the mix of debt and equity financing that maximizes a company's value and minimizes its cost of capital. B) Optimal capital structure refers to the mix of equity and debt financing that minimizes a company's value and maximizes its cost of capital. C) Optimal capital structure refers to the mix of debt and equity financing that has no impact on a company's value or cost of capital. D) Optimal capital structure refers to the mix of debt and equity financing that minimizes a company's value and maximizes its cost of capital. Show Answer Correct Answer: A) Optimal capital structure refers to the mix of debt and equity financing that maximizes a company's value and minimizes its cost of capital. 13. According to M&M Proposition II with taxes, what happens to the cost of equity as the debt-equity ratio increases? A) Cost of equity increases. B) Cost of equity decreases. C) Cost of equity remains constant. D) None of above. Show Answer Correct Answer: B) Cost of equity decreases. 14. What is the difference between a nonprofit organization's core business and its program? A) The core business is the underlying business that supports the program. B) The core business is the program itself. C) The core business is the organization's mission and vision. D) The core business is the organization's financial viability. Show Answer Correct Answer: A) The core business is the underlying business that supports the program. 15. Which of the following factors does not affect the capital structure for Kiara, Riyaan, and Aashi? A) ROI. B) Control consideration. C) Investment criteria. D) Tax rate. Show Answer Correct Answer: C) Investment criteria. 16. Which of the following feature(s) of preference shares are similar to those of equity shares? A) A. Redeemability. B) B. No obligation to pay dividend. C) C. Voting rights. D) Charge over assets. Show Answer Correct Answer: B) B. No obligation to pay dividend. 17. Which of the following is an accounting record at capital formation? A) Dr property Cr registered capital. B) Dr registered capitalCr assets. C) Dr expenditure on the establishment of registered capital Cr. D) None of these are correct. Show Answer Correct Answer: A) Dr property Cr registered capital. 18. A postaudit evaluates the overall outcome of the investment and proposes corrective action if needed. A) TRUE. B) FALSE. Show Answer Correct Answer: A) TRUE. 19. What does internal mean? A) A source from within the business. B) A source from outside the business. Show Answer Correct Answer: A) A source from within the business. 20. What are the three key factors that sustain health in a nonprofit organization? A) Mission, organizational capacity, and capital structure. B) Program, financial viability, and capital structure. C) Leadership, fundraising, and program. D) Mission, program, and fundraising. Show Answer Correct Answer: A) Mission, organizational capacity, and capital structure. ← PreviousNext →Related QuizzesCapital Structure Quiz 1Capital Structure Quiz 2Capital Structure Quiz 3Capital Structure Quiz 4Capital Structure Quiz 5Capital Structure Quiz 6Capital Structure Quiz 7Capital Structure Quiz 8Capital Structure Quiz 9Capital Structure Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books