Question

Which of the following statements is correct?A. 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. B. 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. C. Generally, debt-to-total-assets ratios do not vary much among different industries, although they do vary among firms within a given industry. D. 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.E. Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in most other industries.

Answer 1

A. 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.

Step-by-step explanation:

Put simply, all the other options aren't factual statements which lack reliability. However, it is generally accepted that not all companies would have the same capital structures (eg either equity capital or debt capital).

So, it is accurate to say that, wide variations in capital structures exist both between industries and among individual firms within given industries.