Which statement is TRUE?

A. Market values usually have a dramatic impact on the optimum level of borrowing if they change significantly.
B. The type of the capital invested in the company is of main significance to company management.
C. Rating agencies use book value instead of market value of debt and equity when calculating solvency measures.

Correct Answer: C

A: Market values rarely have an impact on the optimum level of borrowing. B: The amount and types of capital invested by the company is usually the primary concern.