A company's optimal capital structure occurs when:
A)ROA is maximized.
B)the company assets are funded by 50% debt and 50% equity.
C)the company can borrow at a rate lower than its ROA.
D)the ROE is maximized.

Question

Quizplus · Accepted Answer

The optimal capital structure occurs when the company's ROE is maximized. This means that the company is able to generate the highest return for its shareholders while balancing the amount of debt and equity used to finance its operations. This can be achieved by finding the right mix of debt and equity that maximizes the company's profits while minimizing the overall cost of capital.

A Company's Optimal Capital Structure Occurs When