| Direction: Study the following passage carefully and answer the questions given below: |
| Many academics have researched the relevance of capital structure choice and used many drivers to explain the choices of capital structure, being the drivers of cost of debt and capital core focus of many researchers. The companies monitor their capital structure and pay attention to their level of leverage and to drivers that influence their cost of financing. The arguments on the degree of relevance of capital structure are presented first and then the key drivers of capital structure choice used by different researchers and lastly the relevance of and business and industry profitability and risk were considered. |
A) It diversifies the core focus
B) To reduce the financing costs
C) For observing profitability
D) (a) and (c)
Correct Answer: B
Solution :
(b) Reasoning type: Conditional Reasoning Focus of the question: Cause and effect Relationship analogy: Cause to effect analogy For the diverse cost of capital of the company, their capital structure is monitored and attention is paid to their level of leverage and to drivers that influence their cost of financing. So, the cost cutting is the focal point of the company.
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