1. Which of the following statements is correct? a. Generally, debt ratios do not vary much among different industries, although they do vary among firms within a given industry b. Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in most other industries c. Airline companies tend to have very volatile earnings, and as a result they generally have high target debt-to-equity ratios d. Wide variations in capital structures exist both between industries and among individual firms within given industries. These differences are caused by differing business risks and also managerial attitudes e. Since most stocks sell at or very close to their book values, book value capital structures are typically adequate for use in estimating firms' weighted average costs of capital
2. Which of the following statements is correct? a. Once a firm has defined its purpose, scope, and objectives, it must develop a strategy or strategies for achieving its goals. The statement of corporate strategies sets forth detailed plans rather than broad approaches for achieving a firm's goals b. A firm's corporate purpose states the general philosophy of the business and provides managers with specific operational objectives c. Operating plans provide management with detailed implementation guidance, consistent with the corporate strategy, to help meet the corporate objectives. These operating plans can be developed for any time horizon, but many companies use a 5-year horizon d. A firm's mission statement defines its lines of business and geographic area of operations e. The corporate scope is a condensed version of the entire set of strategic plans.