Which of the Following Statements Is False

question 37

Multiple Choice

Which of the following statements is false?

• A) By relying on short-term debt the firm exposes itself to funding risk, which is the risk of incurring financial distress costs should the firm not be able to refinance its debt in a timely manner or at a reasonable rate.
• B) An ultra-conservative policy would involve financing even some of the plant, property, and equipment with short-term sources of funds.
• C) With a conservative financing policy, the firm would use short-term debt very sparingly to meet its peak seasonal needs.
• D) Short-term debt can have lower agency and lemons costs than long-term debt, and an aggressive financing policy can benefit shareholders.

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Definitions:

Genetic Trait

An attribute or characteristic that is passed from parents to offspring through genes.

Operant Conditioning

A method of learning that employs rewards and punishments for behavior, emphasizing the effect of consequences on behavior.

Classical Conditioning

A teaching approach where an association is made between a stimulus found in the environment and one that happens inherently.

Nature

The phenomena of the physical world collectively, including plants, animals, the landscape, and other features and products of the earth.