1.Which of the following factors does not influence a firm's times-interest-earned ratio? a. A firm's tax...

1.Which of the following factors does not influence a firm's times-interest-earned ratio?

a. A firm's tax rate

b. Amount of debt in the firm's capital structure

c. A firm's profitability

d. Interest rate on the firm's debt

2.Business risk depends on a number of factors. Which of the following factors does not influence business risk?

a. Demand variability

b. Foreign risk exposure

c. Extent to which costs are fixed: operating leverage

d. Amount of debt used by a firm: financial leverage

e. Ability to adjust output prices for changes in input costs

3. In a perfect world, a firm would identify its optimal capital structure based on market values, raise capital so as to maintain that structure, and use the optimal percentages to calculate its WACC. However, the world is not perfect. It is impossible to identify a precisely optimal capital structure, and given the volatility inherent in financial markets, it would be impossible to remain on target over time even if the optimal capital structure could be identified. As a result, most firms focus on a target debt-to-capital ratio range as opposed to a single number. True or false?

Solutions

Expert Solution

a. A firm's tax rate

because ratio consider earnings before tax

Amount of debt used by a firm: financial leverage

all other four are factors impacting risk of business

True

the above are answers..

jeff jeffy answered 1 year ago

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