Which of the Following Statements Is CORRECT

Multiple Choice

Which of the following statements is CORRECT?

A) Generally, debt-to-total-assets ratios do not vary much among different industries, although they do vary among firms within a
Given industry.
B) Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in
Most other industries.
C) 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.
D) 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.
E) 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.