Which of the Following Statements Is FALSE

question 56

Multiple Choice

Which of the following statements is FALSE?

• A)The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets,a firm's security choice alters the risk of the firm's equity,but it does not change its value or the amount it can raise from outside investors.
• B)When agency costs are significant,short-term debt may be the most attractive form of external financing.
• C)Too much debt can motivate managers and equity holders to take excessive risks or over-invest in a firm.
• D)Of all the different possible imperfections that drive capital structure,the most clear-cut,and possibly the most significant,is taxes.

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Definitions:

Long-term Organization Goals

Strategic objectives an organization aims to achieve over an extended period, which guide its direction, operations, and efforts for future development and success.

Strategic Management

The continuous planning, observing, analyzing, and evaluating of everything required for a company to achieve its aims and objectives.

Leadership Responsibility

The duty of leaders to guide, support, and drive their teams or organizations towards achieving shared goals.

Company CEO

The Chief Executive Officer, the highest-ranking individual in a company or organization, responsible for making major corporate decisions.