Empirical evidence indicates a large variation in the degree of leverage across firms. For instance, firms in

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Empirical evidence indicates a large variation in the degree of leverage across firms. For instance, firms in the utilities industry carry much more debts in their balance sheet than those in basic materials industry. Profitable firms are usually the firms that borrow the least. How would you explain these phenomena? Justify your answer based on capital structure theories.

Posted Date: May 10, 2024 03:26 AM

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Empirical evidence indicates a large variation in the degree of leverage across firms. For instance, firms in

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Clarifying Variations in Leverage Amongst Firms Several capital structure theories can account for the observed variations in leverage debttoequity ratio amongst firms 1 Tradeoff Theory Miller MM Modi... View the full answer

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