Which of the Following Statements Is False

question 7

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:

Pacinian Corpuscles

Sensory receptors in the skin sensitive to pressure and vibration, helping organisms perceive touch and pressure changes.

Ruffini Endings

Sensory receptors in the skin that detect stretch, pressure, and heat, contributing to the sense of touch.

Root Hair Plexus

A network of root hair cells that increases a plant's surface area for water and nutrient absorption from the soil.

Free Nerve Endings

Sensory receptor endings that are found in nearly all body tissues and are capable of detecting pain, temperature, and touch stimuli.