A company should choose a capital structure that maximizes the firm's worth. As a result, choice (B) is the best way to respond.
The combination of different types of outside resources often referred to as capital, used to finance a corporation is referred to as the capital structure in corporate finance. It is listed in the balance sheet of the company and comprises shareholders' equity, debt (loans), and preferred stock.
Financial leverage, also known as gearing in the UK, is the term used to describe how much debt a company has relative to its other sources of funding. Too much debt can raise the company's risk and limit its financial flexibility, which eventually worries investors and raises the cost of capital.
Hence, option (B) is accurate.
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