Q1. Multiple Choice. (6x 0.5 Mark = 3 Marks)

Encircle the letter corresponding to the right answer.

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 b. False

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 b. False

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

True b. False

Capital structure can be defined as the mix of a firms permanent long-term financing represented by debt, preferred stock, and common stock equity.

a. True b. False

Optimum capital structure is proportionate of equity and debt a company adopts to maximize its wealth and market value and minimize its cost of capital

a. True b. False

Minimizing the Weighted Average Cost of Capital (WACC) is NOT one way to optimize for the lowest cost mix of financing.

a. True b. False