Which of the Following Statements Is FALSE

question 2

Multiple Choice

Which of the following statements is FALSE?

• A)Leverage can reduce the degree of managerial entrenchment because managers are more likely to be fired when a firm faces financial distress.
• B)When a firm is highly levered,creditors themselves will closely monitor the actions of managers,providing an additional layer of management oversight.
• C)According to the empire building hypothesis,leverage increases firm value because it commits the firm to making future interest payments,thereby reducing excess cash flows and wasteful investment by managers.
• D)Managers of large firms tend to earn higher salaries,and they may also have more prestige and garner greater publicity than managers of small firms.As a result,managers may expand (or fail to shut down)unprofitable divisions,pay too much for acquisitions,make unnecessary capital expenditures,or hire unnecessary employees.

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Definitions:

Cation

An ion with a positive charge, formed when an atom loses electrons during a chemical reaction.

Chloride

A chemical element that, when combined with sodium, forms table salt (sodium chloride), and plays vital roles in bodily functions.

Magnesium

A chemical element with the symbol Mg and atomic number 12, essential for human health, involved in over 300 biochemical reactions in the body.

Laboratory Value

A numerical result obtained from a laboratory test that measures specific markers in blood, urine, or other body fluids, used to assess health or diagnose conditions.