Unformatted text preview: 13. Variations in capital structures Aa Aa a Capital structures vary among ﬁrms in the United States and around the world. Relationships, attitudes, tax codes,
and accounting differences contribute to some of the differences. As U.S. ﬁrms become increasingly involved in
worldwide operations, they must become increasingly aware of worldwide conditions, and they must be prepared to
adapt to conditions in the various countries in which they do business. True or False: Indicate whether each of the following statements about the various capital structures is true or false. Statements The least-leveraged industries have the highest TIE ratios. U.S. ﬁrms have more equity and less debt than Germany or
Japan. Management attitude inﬂuences the amount of debt that a ﬁrm takes on. I l n general, utilities do not use debt. Explanation: Close A The least-leveraged industries have the highest TIE ratios, because they have less debt and thus less interest to cover
with earnings. Utilities use large amounts of debt, because their ﬁxed assets make good securities and their stable sales make it safe
for them to carry more debt than a ﬁrm with more business risk. Banks in Germany and Japan are very involved in the operations of the corporations that they lend to; they often
hold an ownership interest in them, so they are more accommodating than U.S. bondholders when the ﬁrms face
ﬁnancial stress. For this reason, U.S. ﬁrms have more equity and less debt than Germany or Japan. Some managers are more aggressive than others when using debt, so management attitude inﬂuences the amount of
debt that a ﬁrm takes on. Flash Player WIN 18,0,0,209 Q3 3.32 (5) 2004-2013 Aplia. All rlghts reserved. , _ .
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