True, False, or Uncertain: If the optimal capital structure of a firm is fairly flat,
management does not need to be concerned about small deviations in the firm's debt
ratio.

Question

Quizplus · Accepted Answer

If the optimal capital structure is fairly flat, small deviations in the debt ratio will not have much impact on firm value. In fact, in this case, the transaction costs associated with restructuring might outweigh any negative effects of having two much or two little debt.

True, False, or Uncertain: If the Optimal Capital Structure of a Firm