1. Capital structure is important as it helps maintains a proper and adequate level of capital, which as result enables the firm to earn high profits and provide more dividends to the shareholders. True False

1. Capital structure is important as it helps maintains a proper and adequate level of capital, which as result enables the firm to earn high profits and provide more dividends to the shareholders. True False

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach

Section: Chapter Questions

Problem 6QE

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Question

1. Capital structure is important as it helps maintains a proper and adequate level of capital, which as result enables the firm to earn high profits and provide more dividends to the shareholders.

True False

2. Capital Structure refers to the kinds of proportionate securities that make up capitalization through different long-term sources like equities, preference shares, debenture, long-term loans, and retained earnings.

True False

3. Optimum capital estimation is necessary. But the formation of capital structure is highly important

True False

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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