Question

1. A financial consultant is interested in the differences in capital structure within different firm sizes in a certain industry. The consultant surveys a group of firms with assets of different amounts and divides the firms into three groups. Each firm is classified according to whether its total debt is greater than stockholders' equity or whether its total debt is less than stockholders' equity. The results of the survey are:

Firm Asset Size (in $ thousands)

                                    <500               500-2,000                  2,000 +                       Total

Debt < equity                    7                      10                                8                                  25

Debt > equity                   10                   18                                9                                  37

             Total             17                   28                         17                             62

Do the three firm sizes have the same capital structure? Use the 0.10 significance level