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Which of the following capital structure theories assumes that market information is symmetric?


A) Signaling theory
B) Contingent theory
C) Arbitrary theory
D) Budgeting theory
E) MM capital structure theory

F) B) and D)
G) A) and B)

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What is financial leverage?


A) The presence of fixed operating costs that do not change when the level of sales changes
B) The portion of stockholders' risk, over and above basic business risk
C) The risk associated with afirm's operations, ignoring any financing effects
D) The combination of debt and equity used to finance a firm
E) The extent to which fixed-income securities are used in a firm's capital structure

F) A) and B)
G) A) and C)

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Risk can be apportioned as financial and business risk. Financial risk and business risk are related in that as business risk increases so does financial risk, although the correlation between the two is not perfect.

A) True
B) False

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