Which of the Following Statements Is False

question 41

Multiple Choice

Which of the following statements is false?

• A) Private equity firms often need to borrow the money needed to buy a public corporation.
• B) Once a private equity firm owns a formerly publicly held corporation,they tend to cut costs and enhance efficiency.
• C) Critics of private equity firms say that companies that have too much cash and too little debt become targets for private equity firms to buy.
• D) A private equity firm is a group of investors that takes a privately held corporation and uses an investment banker to turn it into a publicly held corporation.

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Definitions:

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.

FASB's Proposal

A suggested change or addition to accounting standards published by the Financial Accounting Standards Board.

Employee Stock Options

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares, usually at the discretion of the bondholder.