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Finance_12
Determining the Financing Mix/Capital Structure
Question | Answer |
---|---|
The relative dispersion of variability in the firm's expected earnings before interest and taxes (EBIT). | Business Risk |
Financial Risk | |
The incurring of fixed operating costs in a firm's income stream. | Operating Leverage |
The use of securities bearing a fixed (limited) rate of return to finance a portion of a firm's assets. | Financial Leverage |
Break-Even Analysis | |
Costs that are fixed per unit of output but cary in total as output changes. | Variable Costs |
Costs that do not vary in total dollar amount as sales or quantity of output changes. | Fixed Costs |
Contribution Margin | |
DOL | |
DFL | |
DCL | |
The capital structure that minimizes the firm's composite cost of capital for raising a given amount of funds. | Optimal Capital Structure |
Modigliani-Miller Hypothesis | |
The maximum proportion of debt that the firm can include in its capital structure and still maintain its lowest composite cost of capital. | Debt Capacity |
Agency Costs | |
Bankruptcy Costs |