Which of the Following Statements Is FALSE

question 88

Multiple Choice

Which of the following statements is FALSE?

• A)An important consequence of leverage is the risk of bankruptcy.
• B)Whether default occurs depends on the cash flows,not on the relative values of the firm's assets and liabilities.
• C)Economic distress is a significant decline in the value of a firm's assets,whether or not it experiences financial distress due to leverage.
• D)Modigliani and Miller's results continue to hold in a perfect market even when debt is risky and the firm may default.

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Definitions:

Vacant Sale

The sale of a property that is empty or not currently occupied by tenants or owners.

Merchantable Quality

Freedom of goods from defects that, if known, would impact the price.

Implied Terms

Provisions not expressly stated in a contract but assumed to exist by the nature of the agreement or by law.

Office Building

A structure designed primarily for hosting professional or administrative services and businesses.