CFA Practice Question

There are 151 practice questions for this study session.

CFA Practice Question

Which of the following statements is false?

A. Firms within a given industry often tend to have similar capital structures.
B. Firms in the electric utility industry use a great deal of debt financing.
C. Firms in the bio-tech industry tend to use a tremendous amount of debt financing.
D. We might expect to see low-risk industries with high levels of debt.
Correct Answer: C

Firms in the bio-tech industry tend to use a very little debt financing.

User Contributed Comments 6

User Comment
kalps As they have no material assets - mainly euqity finance
rockeR Like Microsoft
setmefree their business is riskier, cuz future earnings are more unpredictable than, say a low growth industry. so if they issue debt, it would be very expensive, due to higher risk. thus they avoid using it, or unable to afford it.
tanyak p.131 - of the Corporate Finance and Portfolio Management Text - "whereas operating costs are similar among companies in the same industry, competitors may decide on different capital structures"

This may make A a false statement? However, notice the "often" in A: A is still a correct statement.
quanttrader riskier businesses, where earnings are most volatile use less debt
thebkr777 ^the only cool username I've seen
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