Which of the Following Statements Is False

question 12

Multiple Choice

Which of the following statements is false?

• A) Financial transactions are not sources of value, but merely serve to adjust the timing and risk of the cash flows to best suit the needs of the firm or its investors.
• B) The NPV of trading a security in a normal market is zero.
• C) We cannot separate a firm's investment decision from the decision of how to finance the investment.
• D) In normal markets, trading securities neither creates nor destroys value.

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Definitions:

Transfer Prices

Prices used for transactions between divisions of the same company, often used for budgeting and taxation purposes.

Actual Costs

The real costs incurred by a business, including all expenses related to production, operation, and maintenance.

Standard Costs

Predetermined costs for materials, labor, and overhead used in budgeting and assessing performance by comparing them to actual costs.

Inventory Decrease

A reduction in the quantity of goods held in stock by a business.