Which of the Following Statements Is FALSE

question 108

Multiple Choice

Which of the following statements is FALSE?

• A)When a firm faces financial distress,creditors can gain by making sufficiently risky investments,even if they have negative NPV.
• B)When a firm has leverage,a conflict of interest exists if investment decisions have different consequences for the value of equity and the value of debt.
• C)In some circumstances,managers may take actions that benefit shareholders but harm the firm's creditors and lower the total value of the firm.
• D)Agency costs are costs that arise when there are conflicts of interest between stakeholders.

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Definitions:

Cash Dividends

These are payments made by a corporation to its shareholders, usually as a distribution of profits.

Cash Dividends Payable

Cash dividends payable are dividends that a company has declared to distribute to its shareholders but has not yet paid out.

Payment Of Dividends

The distribution of some of a company's earnings to its shareholders as determined by the company's board of directors.

Beginning Of The Year

Refers to the start of a fiscal or calendar year, marking the point in time when businesses commonly review and adjust budgets, plans, and strategies.