Which One of the Following Statements Is TRUE

question 19

Multiple Choice

Which one of the following statements is TRUE?

• A) When lenders protect themselves from the risk of asset switching, the borrowing firms will be limited in the projects they can profitably undertake.
• B) An agency relationship is when a principal works for an agent.
• C) In an agency relationship, the agent delegates authority to the principal.
• D) Firms borrowing money have greater flexibility to use that money when there are debt covenants.
• E) When lenders protect themselves from the risk of asset switching by raising the interest rate, the firm's WACC can decrease.

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Definitions:

Corporate Reputation

The perception of a company's trustworthiness, quality, and reliability by the public, customers, and stakeholders.

Shareholder Value

The return on investment that shareholders receive from a company, often seen as a primary goal of businesses, including profit and stock price appreciation.

Corporate Social Responsibility

A business model that helps a company be socially accountable to itself, its stakeholders, and the public, by practicing ethical and sustainable operations.

Greenwashing

Misleading consumers regarding a firm’s environmental practices or the environmental benefits of a certain product.