Book values are sometimes used to compute the percentage of debt in an firm's capital structure because much corporate debt is infrequently traded and market prices cannot be obtained.

Question

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This statement is true. Book values are often used to estimate the percentage of debt in a firm's capital structure because it can be difficult to obtain market prices for much of the corporate debt, which is not frequently traded. Book values provide an estimate of the amount of debt that the company has recorded on its balance sheet.

Book Values Are Sometimes Used to Compute the Percentage of Debt