Question 1

According to data collected in 2003, larger publicly traded firms tended to

Accepted Answer

Larger publicly traded firms in 2003 were generally more indebted than smaller firms, as they had greater access to capital markets and could leverage their size for more debt financing.

Question 2

What are the two most important mechanisms that explain capital structure changes
over 5-year time horizons for U.S. firms? How much of the change in the debt-equity
ratios did these two factors explain?

Accepted Answer

The answer of What are the two most important mechanisms...

Question 3

According to data collected on the capital structure of firms in 2005, which of the following categories of firms would you expect to have the lowest debt-equity ratio?

Accepted Answer

Computer software manufacturers typically have high internal cash flows, which can be used to finance their operations and investments, thus resulting in a lower debt-equity ratio. In contrast, airlines, automobile manufacturers, and mortgage bankers require significant external financing, which tends to lead to higher debt-equity ratios. Computer software manufacturers typically have a high level of intangible assets and cash flows, which allows them to have a lower debt-equity ratio compared to other industries such as airlines, automobile manufacturers, or mortgage bankers.

Question 4

Based on a study of capital structure changes over 5-year time horizons for publicly traded U.S. firms from 1964 to 2003,

Accepted Answer

The answer of Based on a study of capital structure...

Question 5

Indicate how each of the following actions will affect the ratios provided, all else equal.
Use "+" for increase, "-" for decrease, and "0" for no change.

Accepted Answer

The answer of Indicate how each of the following actions...

Question 6

How does the capital structure of utilities differ from those of biotech companies?
What is the likely reason for this difference?

Accepted Answer

The answer of How does the capital structure of utilities...

Question 7

According to a 1991 study of the capital structure of large firms throughout the world,

Accepted Answer

U.S. corporations tended to have higher debt ratios than firms in other countries.

Question 8

Firms tend to retire debt when

Accepted Answer

Firms may retire debt when their debt ratio exceeds that of their peers to improve their financial stability and align with industry standards.

Question 9

According to the empirical evidence, which of the following statements about capital structure is true?

Accepted Answer

DC) Empirical evidence suggests that changes in a firm's capital structure are significantly influenced by changes in the value of its stock. This is because the market value of equity can fluctuate, affecting the debt-to-equity ratio.D) Research indicates that managers often have a target capital structure in mind, which is considered optimal for the firm. They tend to make adjustments to the capital structure in response to changes in market conditions to maintain or move towards this target.

Question 10

From 1999 to 2001, most of the increase in equity shares outstanding were the result of

Accepted Answer

The answer of From 1999 to 2001, most of the...

Question 11

All else equal, which of the following would cause a decrease in the debt-equity (based on market value)ratio?

Accepted Answer

An increase in the stock price increases the market value of equity, which decreases the debt-equity ratio if debt remains constant.

Question 12

Empirical evidence suggests that when a firm's stock price increases, firms tend to

Accepted Answer

The answer of Empirical evidence suggests that when a firm's...

Question 13

There are 1 million shares outstanding with a current market value of $2 a share.
-Refer to the information above. Calculate the following ratios for Serendipity Imports:
Total liabilities-to-assets, based on book value, financial debt-to-capital, based on
book value, financial debt-to-capital, based on market value, and the interest coverage
ratio.

Accepted Answer

The answer of   There are 1 million shares...

Question 14

What are the arguments for and against including non-financial liabilities when
calculating financial leverage ratios?

Accepted Answer

The answer of What are the arguments for and against...

Question 15

Based on the empirical evidence, how do large firms and small firms differ in terms of
their use of debt?

Accepted Answer

The answer of Based on the empirical evidence, how do...

Question 16

Which of the following statements is (are)true, based on data collected on the capital structure of publicly traded U.S. firms in 2003?

Accepted Answer

The answer of Which of the following statements is (are)true,...

Question 17

A $500 million firm has 10 million shares outstanding. The market price per share is
$30. What is its current debt-equity ratio? What will its debt-equity ratio be if the
market price per share drops to $20, all else equal?

Accepted Answer

The answer of A $500 million firm has 10 million...

Question 18

According to data collected in 2003, how much of smaller, publicly traded firms' debt was short-term?

Accepted Answer

According to the data collected in 2003, 67% of smaller, publicly traded firms' debt was short-term. According to data collected in 2003, 67% of smaller, publicly traded firms' debt was short-term.

Question 19

Which of the following characteristics is likely to be associated with higher levels of indebtedness?

Accepted Answer

The answer of Which of the following characteristics is likely...

Question 20

Rank the following in order of their importance (from most important to least important)in explaining capital structure changes over 5-year time horizons for publicly traded U.S. firms
From 1964 to 2003:
I. Net short-term debt issuing activity
II. Net long-term debt issuing activity
III. Dividend payments
IV. Net equity issuing activity

Accepted Answer

Net long-term debt issuing activity (II) and net equity issuing activity (IV) are typically the most significant factors in capital structure changes over a 5-year horizon, as firms adjust their leverage and equity levels. Short-term debt (I) and dividend payments (III) are generally less impactful in this context.

Quiz 22: Capital Structure Patterns in the United States

According to data collected in 2003, larger publicly traded firms tended to

What are the two most important mechanisms that explain capital structure changes over 5-year time horizons for U.S. firms? How much of the change in the debt-equity ratios did these two factors explain?

According to data collected on the capital structure of firms in 2005, which of the following categories of firms would you expect to have the lowest debt-equity ratio?

Based on a study of capital structure changes over 5-year time horizons for publicly traded U.S. firms from 1964 to 2003,

Indicate how each of the following actions will affect the ratios provided, all else equal. Use "+" for increase, "-" for decrease, and "0" for no change.

How does the capital structure of utilities differ from those of biotech companies? What is the likely reason for this difference?

According to a 1991 study of the capital structure of large firms throughout the world,

Firms tend to retire debt when

According to the empirical evidence, which of the following statements about capital structure is true?

From 1999 to 2001, most of the increase in equity shares outstanding were the result of

All else equal, which of the following would cause a decrease in the debt-equity (based on market value) ratio?

Empirical evidence suggests that when a firm's stock price increases, firms tend to

What are the arguments for and against including non-financial liabilities when calculating financial leverage ratios?

Based on the empirical evidence, how do large firms and small firms differ in terms of their use of debt?

Which of the following statements is (are) true, based on data collected on the capital structure of publicly traded U.S. firms in 2003?

A $500 million firm has 10 million shares outstanding. The market price per share is $30. What is its current debt-equity ratio? What will its debt-equity ratio be if the market price per share drops to $20, all else equal?

According to data collected in 2003, how much of smaller, publicly traded firms' debt was short-term?

Which of the following characteristics is likely to be associated with higher levels of indebtedness?