Which of the Statements Below Is FALSE

question 40

Multiple Choice

Which of the statements below is FALSE?

• A)When a company performs well,it can handle more debt and benefit the owners.
• B)Borrowing from debt lenders at one rate and investing the money in the business and making a higher rate is bad for the owners.
• C)Assume that the more debt the company has sold,the better off the shareholders are.This is the case where the earnings reflect a return greater than the cost of debt.
• D)Financial leverage is the degree to which a firm or individual utilizes borrowed money to make money.

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Definitions:

Required Return

The minimum rate of return that investors expect or require from an investment to make it worthwhile.

Annual Dividend

The total dividend payment a company makes to its shareholders in a year.

Dividend Growth Model

A valuation method used to estimate the value of a stock based on its expected future dividend payments and growth rate.

Dividends

Payments made by a corporation to its shareholders, typically from profits, as a distribution of earnings.