1. What is a firm's capital structure? What ratios assess the degree of financial leverage in a firm's capital structure?
2. Describe the two Modigliani and Miller propositions, the key assumptions underlying them, and their relevance to capital structure decisions.
3. "the cost of debt is lower than the cost of equity. Interest paid on debt financing can be deducted from taxable income of the firm. Therefore, debt financing can help to reduce the firm's tax payment. Thuse fims should use maximum amount debt to finance its funding needs" Critically evaluate the above statements.

Answer rating: 100% (QA)

A firms capital structure refers to the mix of debt and equity financing used to finance its operations and investments It represents the proportion of different sources of capital that a company uses ... View the full answer