Which of the Following Statements Is FALSE

question 20

Multiple Choice

Which of the following statements is FALSE?

• A)One disadvantage of using leverage is that it does not allow the original owners of the firm to maintain their equity stake.
• B)The separation of ownership and control creates the possibility of management entrenchment;facing little threat of being fired and replaced,managers are free to run the firm in their own best interests.
• C)Managers also have their own personal interests,which may differ from those of both equity holders and debt holders.
• D)The costs of reduced effort and excessive spending on perks are another form of agency cost.

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Definitions:

North Pole

One of the two points on the Earth where the planet's magnetic field lines converge, historically thought of as the top of the magnetic field.

Electromagnet

A type of magnet whose magnetic field is produced by the flow of electric current, typically wrapped around a core of ferromagnetic material.

Color Band

Colored stripes on components like resistors, used to indicate their value or rating.

Tolerance

The allowable deviation in the specifications of a component or system from the stated values, which can affect its performance or compatibility.