国际会计全英简答题.doc

一．If there were no imperfections in financial markets, what capital structure should the firm seek? Which market imperfections are most important considerations in finance? Without financial-market imperfections, variation in capital structure would have no impact on share price. Capital structure decisions would be irrelevant, as suggested by Modigliani-Miller. Market imperfections take us away from a frictionless world and reduce the effectiveness of arbitrage. As a result, different financial liabilities and common stock can have different costs on a certainty-equivalent basis.???The two most important imperfections with respect to capital structure are probably income taxes and bankruptcy costs. Their joint impact was taken up in the chapter. Other imperfections include agency costs, transaction costs on the sale of stocks and bonds by investors, flotation costs to the corporation, legal restrictions governing investor behavior, and restrictions on margin loans and short sales. 二．What are bankruptcy costs? What are agency cost? How do they affect the valuation of the firm when it comes to financial leverage? Bankruptcy costs include out-of-pocket expenses to lawyers, accountants, appraisers, trustees, and others as well as the loss of economic value that often occurs as a company approaches bankruptcy and is not able to operate efficiently.???Agency costs include costs of shareholders monitoring the actions of management and lenders monitoring the actions of a company. Auditing fees, appraiser fees, bonding fees, and the cost of protective covenants are examples of agency costs. These costs tend to increase at an increasing rate beyond some point of financial leverage.???Therefore, bankruptcy and agency costs eventually offset the net tax benefit associated with the employment of debt funds by the corporation. They bound the solution so that there is an optimal capital structure. 三．Suppose that you are the financial manager of a closely held (owned by few share