Which of the Following Statements Is CORRECT, Holding Other Things

Which of the following statements is CORRECT, holding other things constant?

A) Firms whose assets are relatively liquid tend to have relatively low
Bankruptcy costs, hence they tend to use relatively little debt.
B) An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.
C) If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the
Average corporation.
D) An increase in the company's degree of operating leverage is likely
To encourage a company to use more debt in its capital structure.
E) An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.

Correct Answer:

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