Which of the Following Statements Is False

question 34

Multiple Choice

Which of the following statements is false?

• A) If there is uncertainty regarding EBIT, then with a higher interest expense there is a greater risk that interest will exceed EBIT.
• B) Even for a firm with positive earnings, growth will affect the optimal leverage ratio.
• C) From a tax perspective, the firm's optimal level of debt is proportional to its current earnings.
• D) The optimal proportion of debt in the firm's capital structure will be higher, the higher the firm's growth rate.

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Definitions:

Ethical Standards

Principles that guide behavior and actions based on what is morally right and wrong.

Culture

The collective beliefs, practices, languages, creations, historical accounts, folklore, and structures of a community that are transmitted through successive generations.

Future Orientation

A mindset or perspective that focuses on planning, anticipating, and preparing for future events, goals, or possibilities.

Short-term Sacrifices

Giving up something valued in the near term with the expectation of gaining benefits in the future.