Which One of the Following Statements Is True

Multiple Choice

Which one of the following statements is true?

A) A firm with low anticipated profits will likely take on a high level of debt.
B) A successful firm will probably be all-equity financed.
C) Rational firms raise debt levels when profits are expected to decline.
D) Rational investors are likely to infer a firm is more valuable when its debt level declines.
E) Investors will generally view an increase in debt as a positive sign for the firm's future value.