Which of the following statements is true of capital structures around the world?
A) There have been no significant observed differences between the capital structures of U.S. corporations and their German and Japanese counterparts.
B) Different countries use essentially the same international accounting conventions with respect to reporting assets on a historical versus replacement cost basis.
C) An analysis of both bankruptcy and equity reporting costs leads to the conclusion that U.S. firms have more equity and less debt than firms in Japan and Germany.
D) Equity monitoring costs are higher in the United States than in Japan and Germany.
E) Debt monitoring costs are lower in the United States than in Japan and Germany.

Question

Quizplus · Accepted Answer

An analysis of bankruptcy costs and equity reporting costs suggests that firms in the US have more equity and less debt in their capital structures compared to firms in Japan and Germany. There are observed differences in the capital structures of corporations in different countries. Option A is incorrect because there are notable differences in capital structures across countries. Option B is incorrect as different countries employ different international accounting conventions with respect to reporting assets on a historical versus replacement cost basis. Option D is incorrect as equity monitoring costs are generally higher in Japan and Germany compared to the US. Option E is incorrect as debt monitoring costs are generally higher in Japan and Germany compared to the US.

Which of the Following Statements Is True of Capital Structures