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Which of the following statements accurately describes features of the trade-off theory of capital structure? The theory suggests that capital structure is reflection of the
Which of the following statements accurately describes features of the trade-off theory of capital structure? The theory suggests that capital structure is reflection of the firm's need for external finance, and firms prefer to first use internal funds, then issue debt, then hybrid securities and finally issuing ordinary shares. The theory suggests that firm's cost of capital can be minimized by balancing the tax shield benefits generated by debt and financial distress costs. The theory suggests that as the business risk increases, all other things remaining equal, we would expect to see an increase in debt levels. More than one of the other statements accurately describes features of the trade- off theory of capital structure. None of the other statements accurately describes features of the trade-off theory of capital structure
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