When benchmarking a firm's capital structure, management should compare it
A) firms in S&P 500.
B) firms in the same geographic region.
C) firms recognized for the quality of their management.
D) firms in similar lines of business.

Question

Quizplus · Accepted Answer

Benchmarking a firm's capital structure should involve comparing it to other firms in similar lines of business. This will allow for a more accurate comparison of debt ratios and other relevant capital structure metrics that are specific to the industry. Comparing to firms in the S&P 500, the same geographic region, or firms recognized for quality management may not take into account industry-specific dynamics that impact optimal capital structure choices.

When Benchmarking a Firm's Capital Structure, Management Should Compare It