Capital structure theory suggests that companies may put the interests of ________ ahead of the interests of ________.
A)Potential stockholders,existing stockholders
B)Stockholders,bondholders
C)There are no potential conflicts t arising from the way a firm manages its capital structure.
D)Existing shareholders,IRS

Question

Quizplus · Accepted Answer

Capital structure theory suggests that companies may prioritize the interests of stockholders over bondholders since the former holds a residual claim on the profits of the company while the latter holds a fixed claim on the company's assets. This can create conflicts of interest between the two groups of investors.

Capital Structure Theory Suggests That Companies May Put the Interests