| Direction: Study the following passage carefully and answer the questions given below: |
| Many academics have researched the relevance of capital structure choice and used many drivers to explain the choices of capital structure, being the drivers of cost of debt and capital core focus of many researchers. The companies monitor their capital structure and pay attention to their level of leverage and to drivers that influence their cost of financing. The arguments on the degree of relevance of capital structure are presented first and then the key drivers of capital structure choice used by different researchers and lastly the relevance of and business and industry profitability and risk were considered. |
A) In order to leverage the profitability
B) In order to ensure the cost effectiveness
C) In order to form a capital structure
D) (a) and (c)
Correct Answer: B
Solution :
(b) Reasoning type: Conditional Reasoning Focus of the question: Assumption Relationship analogy: Degrees of a Characteristic Analogy The question focuses on the assumption for the priority relevancy and risks. It is because; the companies mostly depend on relevance of capital structure choice. So, it is important to en- sure cost of financing or cost effectiveness to assess the degree of relevance at first and then the risk factors.
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