You are given a background paragraph that describes one or more causal or qualitative relationships such as a relationship in economics or a scientific law and a story that makes use of the concepts or the relationship described in the provided paragraph. You need to come up with a question about the story that requires an understanding of the relationship described in the background paragraph. The generated question should not be answerable without both the background and story. Write a question about the story that requires a relationship in the background paragraph to answer. Check whether your question requires both the background paragraph and the story to answer. If your question can be answered by only one of these, try to rewrite your question so that it requires both. Note that "flipping" a word in the question can give rise to a new question where the answer will be different from the original question. Often, "flipping" a word gives rise to flipping the direction of the relationship, for example, from "increase" to "decrease."

Background Paragraph: The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes back to Kraus and Litzenberger[1] who considered a balance between the dead-weight costs of bankruptcy and the tax saving benefits of debt. Often agency costs are also included in the balance. This theory is often set up as a competitor theory to the pecking order theory of capital structure. A review of the literature is provided by Frank and Goyal.[2]

An important purpose of the theory is to explain the fact that corporations usually are financed partly with debt and partly with equity. It states that there is an advantage to financing with debt, the tax benefits of debt and there is a cost of financing with debt, the costs of financial distress including bankruptcy costs of debt and non-bankruptcy costs (e.g. staff leaving, suppliers demanding disadvantageous payment terms, bondholder/stockholder infighting, etc.). The marginal benefit of further increases in debt declines as debt increases, while the marginal cost increases, so that a firm that is optimizing its overall value will focus on this trade-off when choosing how much debt and equity to use for financing.
Story: Company X stopped taking on more debt, and decided to file for bankruptcy, while company Y, kept benefiting from the tax benefits of debt, having a lower debt level.
Which company discharged less debt, company X or company Y?