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Firms That Maintain a Constant Ratio of Debt-Equity Over a Variable

Question 43

Multiple Choice

Firms that maintain a constant ratio of debt-equity over a variable business cycle may find that:


A) debt has grown too large, too fast.
B) it is more difficult to maintain a stable dividend.
C) debt covenants always accommodate more debt, but often prevent debt prepayment.
D) equity is always less expensive to obtain than debt.

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