- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 6. Capital Structure
- Subject 4. Optimal Capital Structure
CFA Practice Question
The static trade-off theory tries to balance between ______ and ______. I. dividends distributed
II. tax shield benefit from using debt
III. the costs of financial distress
IV. business risks
Correct Answer: II and III
The static trade-ff theory tries to balance the costs of financial distress with the tax shield benefit from using debt. Under this theory, there exists an optimal capital structure that is a combination of debt and equity.
User Contributed Comments 1
| User | Comment |
|---|---|
| nigelyang7 | It comes straight forward from the notes. |