According to the trade-off capital structure theory when, Financial Management

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According to the trade-off capital structure theory when

1. Which of the following is NOT associated with (or does not contribute to) business risk?

a. Demand variability.

b. The extent to which operating costs are fixed.

c. Sales price variability

d. Input price variability.

e. The extent to which interest rates on the firm's debt fluctuate.

2. "According to the trade-off capital structure theory, when the firm has a debt ratio that is higher than its optimal capital structure, the marginal gain from tax savings is lower than the marginal loss from financial distress and agency costs." True or false?

a. False

b. True

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