All of the Following Statements Are Correct Except

question 47

Multiple Choice

All of the following statements are correct except:

• A)The pecking order hypothesis is a theory that states managers prefer to use additions to retained earnings to finance the firm,then debt,and (as a final resort)new equity.
• B)The market timing hypothesis states that firms try to time the equity market by issuing stock when their stock prices are high and repurchasing shares when stock values are low.
• C)The static tradeoff hypothesis states that firms will balance the advantages of debt (its lower cost and tax-deductibility of interest)with its disadvantages (greater possibility of bankruptcy and the value of explicit and implicit bankruptcy costs).
• D)Agency costs reduce the optimal level of debt financing for a firm below the level that would be appropriate if agency costs were zero.
• E)All of the above statements are correct.

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Definitions:

National Norms

Statistical standards that represent the average performance or behavior of a specific national population, often used in standardized testing.

Mode

The value that appears most frequently in a data set, a measure of central tendency in statistics.

Interquartile Range

A measure of variability in statistics, calculated by subtracting the value at the first quartile from the value at the third quartile, reflecting the spread of the middle 50% of data points.

National Counseling Exam

A comprehensive assessment administered to evaluate the knowledge and skills of those seeking to become licensed professional counselors.