Question
Flexibility in relation to capital structure may mean that a company may not always be at its target capital structure but will strive to
Flexibility in relation to capital structure may mean that a company may not always be at its target capital structure but will strive to reach its target capital structure over time. It is important that the company communicates to investors what its target capital structure is as this will inform investors about the long-term sources of financing and risk of the company. Which of the following statements is less likely to be true? a. A low share price means that the company is less likely to undertake share buy backs in order to move towards its target capital structure O b. A cost over-run on a major project may mean that the company makes greater use of borrowings to finance the project thereby moving away from its target capital structure Oc. A low share price means that the company will not wish to make a rights issue to finance an acquisition and may make a greater use of debt than indicated by its target capital structure Od. The company deviates from its target capital structure due to a short-term opportunity to obtain loan finance at a very low interest rate The company may maintain borrowing capacity and a greater cash balance and an inefficient capital structure in order to take advantage of investment opportunities that may arise
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started