Which of the Following Statements Is False

question 7

Multiple Choice

Which of the following statements is false?

• A) The data show a clear preference for equity as a source of external financing for the total population of Canadian firms.
• B) Debt as a fraction of firm value has varied in a range from 30-45% for the average firm.
• C) Capital expenditures greatly exceed firms' external financing, implying that most investment and growth is supported by internally generated funds, such as retained earnings.
• D) Firms in growth industries like biotechnology or high technology carry very little debt, whereas airlines, auto makers, utilities, and financial firms have high leverage ratios.

---

Definitions:

Default

Failure to fulfill a financial obligation, such as missing a loan repayment.

Debt

An amount of money borrowed by one party from another, often for making large purchases that they could not afford under normal circumstances, which needs to be paid back.

FICA

Federal Insurance Contributions Act; a United States federal payroll tax imposed on both employees and employers to fund Social Security and Medicare.

Federal Income Taxes

Taxes imposed by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.