A firm performs capital restructuring in order to ____.
A)decrease its risk by adding more leverage
B)increase its risk by increasing equity
C)get to an optimal capital structure
D)increase the return on equity by eliminating all debt

Question

Quizplus · Accepted Answer

The purpose of capital restructuring is to reach an optimal capital structure, which balances the use of debt and equity in order to maximize the value of the firm. This does not necessarily involve adding more leverage or eliminating all debt, but rather finding the right balance that minimizes the cost of capital and maximizes shareholder value. Increasing risk by adding more equity or increasing leverage may not necessarily lead to an optimal capital structure.

A Firm Performs Capital Restructuring in Order to ____