A capital restructuring occurs when a ﬁrm:
A) Increases its debt-equity ratio while maintaining a constant debt-to-asset ratio.
B) Changes its debt-equity ratio without changing its total assets.
C) Reduces both its debt and its equity while maintaining a constant debt-equity ratio.
D) Changes its level of debt without changing its total equity.
E) Reﬁnances its debt at a lower rate of interest.

Question

Quizplus · Accepted Answer

A capital restructuring occurs when a firm changes its debt-equity ratio without changing its total assets. This is because capital restructuring involves changing the composition of a firms' capital and can include adjustments to the amount and type of debt and/or equity used to finance the firm's operations. Option B correctly represents this definition.

A Capital Restructuring Occurs When a ﬁRm