All else equal, which of the following would cause a decrease in the debt-equity (based on market value)ratio?
A)A firm repurchases some of its shares.
B)Dividends are paid.
C)The stock price increases.
D)All of the above will result in a decrease in the debt-equity ratio, all else equal.

Question

Quizplus · Accepted Answer

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

All Else Equal, Which of the Following Would Cause a Decrease