Which of the Following Statements Is FALSE

question 3

Multiple Choice

Which of the following statements is FALSE?

• A) If the covenants are designed to reduce agency costs by restricting management's ability to take negative-NPV actions that exploit debt holders, then the reduction in the firm's borrowing cost can more than outweigh the cost of the loss of flexibility associated with covenants.
• B) Once bonds are issued, equity holders have an incentive to increase dividends at the expense of debt holders.
• C) Covenants may restrict the level of further indebtedness and specify that the issuer must maintain a minimum amount of working capital.
• D) By including more covenants, issuers increase their costs of borrowing.

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Definitions:

Staging

The process of classifying the extent and spread of diseases like cancer within the body, often determining the choice of therapies and the prognosis.

Cancer Cells

Abnormal cells that divide uncontrollably and have the potential to invade and spread to other parts of the body.

Chemotherapy

A method of treating cancer that involves administering one or more chemotherapy drugs according to a specific, standardized protocol.

Immune Response

The body's defense mechanism against foreign substances or pathogens, involving various cells and proteins.