The indifference analysis refers to the indifference of:
A)earnings with respect to two alternative financing plans.
B)sales with respect to the cost of debt.
C)cost of equity with respect to debt structure.
D)risk of bankruptcy with respect to debt structure.

Question

Quizplus · Accepted Answer

Indifference analysis focuses on comparing two alternative financing plans based on the earnings indifference point. This is the point at which the earnings of the two financing plans are equal, and the choice between them becomes irrelevant. It is used to determine the best financing plan for a company, taking into account factors such as interest rates, debt-to-equity ratios, and other financial indicators. Therefore, option A is the best choice as it accurately describes the concept of indifference analysis.

The Indifference Analysis Refers to the Indifference Of