Which of the Following Statements Is False

question 10

Multiple Choice

Which of the following statements is false?

• A) When a firm faces financial distress, shareholders have an incentive not to invest and to withdraw money from the firm if possible.
• B) Because top managers often hold shares in the firm and are hired and retained with the approval of the board of directors, which itself is elected by shareholders, managers will generally make decisions that increase the value of the firm's equity.
• C) An over-investment problem occurs when shareholders have an incentive to invest in risky positive-NPV projects.
• D) A negative-NPV project destroys value for the firm overall.

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Definitions:

Sole Proprietorship

A business owned and operated by one individual, where there is no legal distinction between the owner and the business entity.

Incorporated

The process of legally declaring a business entity as a corporation, providing its owners with benefits such as limited liability.

Accounts Receivable

Money owed to a business by its clients or customers for goods or services provided on credit.

Accounts Payable

The amount of money a company owes to its suppliers or vendors for goods and services received but not yet paid for.