Which of the Following Statements Is FALSE

question 38

Multiple Choice

Which of the following statements is FALSE?

• A)Creditors often place restrictions on the actions that the firm can take.Such restrictions are referred to as debt covenants.
• B)Covenants are often designed to prevent management from exploiting debt holders,so they may help to reduce agency costs.
• C)Agency costs are smallest for long-term debt.
• D)Covenants may limit the firm's ability to pay large dividends or the types of investments that the firm can make.

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Definitions:

Otherwise Legal

Pertaining to actions or conditions that are permitted or recognized by law, except for specific exclusions or conditions.

Phishing

Online fraud in which criminals pretend to be legitimate companies by using e-mails or malicious websites that trick individuals and companies into providing useful information, such as bank account numbers, Social Security numbers, and credit-card numbers.

Identity Theft

The act of stealing another’s identifying information—such as a name, date of birth, or Social Security number—and using that information to access the victim’s financial resources.

Cyber Fraud

Fraud that involves the online theft of credit-card information, banking details, and other information for criminal use.