According to Rajan and Zingales, debt ratios of individual companies depend on
A) size: Large firms have higher debt ratios; and tangible assets: Firms with high ratios of fixed assets to total assets have higher debt ratios.
B) size: Large firms have higher debt ratios; tangible assets: Firms with high ratios of fixed assets to total assets have higher debt ratios; and profitability: More profitable firms have lower debt ratios.
C) size: Large firms have higher debt ratios; tangible assets: Firms with high ratios of fixed assets to total assets have higher debt ratios; profitability: More profitable firms have lower debt ratios; and market to book: Firms with higher ratios of market-to-book value have lower debt ratios.
D) size: Large firms have higher debt ratios; tangible assets: Firms with high ratios of fixed assets to total assets have higher debt ratios; profitability: More profitable firms have lower debt ratios; market to book: Firms with higher ratios of market-to-book value have lower debt ratios; and market structure: Firms with monopoly power have higher debt ratios.
Correct Answer:
Verified
Q43: MM's Proposition I corrected for corporate taxes
Q44: The pecking order theory of capital structure
Q47: Risk shifting, refusing to contribute equity, and
Q52: The pecking order theory of capital structure
Q55: Inclusion of restrictions in a bond contract
Q56: The present value of the interest tax
Q57: Under the trade-off theory, how will a
Q59: Always use the average corporate tax rate
Q60: What signal is sent to the market
Q70: According to the trade-off theory, more profitable
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents