25557 Corporate Finance: Theory & Practice
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Lecture 10 Topic – Optimal Financing Policy
- Most financial managers measure debt ratios from their companies’ book balance sheets. Many financial economists emphasize ratios from market-value balance sheets.
- Which is the right measure in principle?
- Does the trade-off theory propose to explain book or market leverage?
- Does the pecking-order theory propose to explain book or market leverage?
- Financial distress:
- What are the costs of going bankrupt? Explain briefly.
- “A company can incur costs of financial distress without ever going bankrupt.” Explain how this can happen