Question

Which of the following statements is correct?A. 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. B. Drug companies (prescription, not illegal!) generally have high debt-to-equity ratios because their earnings are very stable and, thus, they can cover the high interest costs associated with high debt levels. C. Generally, debt-to-total-assets ratios do not vary much among different industries, although they do vary among firms within a given industry. D. Since most stocks sell at or very close to their book values, book value capital structures are almost always adequate for use in estimating firms' costs of capital.E. Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in most other industries.

Answer 1

Answer: Wide variations in capital structures exist between industries and also between individual firms within industries and are influenced by unique firm factors including managerial attitudes.

Explanation:

Out of the options that are given in the question, the correct option is that wide variations in capital structures exist between industries and also between individual firms within industries and are influenced by unique firm factors including managerial attitudes.

All the other options are false. Debt-to-total-assets ratios varies much among different industries.