Rajan and Zingales ["What Do We Know about Capital Structure? Some Evidence from International Data," 1995] found that leverage decreases with ______.
A) the tangibility of the firm's assets
B) profitability
C) firm size
D) All of the above are associated with higher leverage
E) None of the above are associated with higher leverage

Question

Quizplus · Accepted Answer

Rajan and Zingales found that leverage decreases with profitability, among other factors. This is because more profitable firms have less need to borrow due to their higher internal cash flows.

Rajan and Zingales ["What Do We Know About Capital Structure