Which of the Following Statements Is False

question 99

Multiple Choice

Which of the following statements is false?

• A) The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets, a firm's security choice alters the risk of the firm's equity, but it does not change its value or the amount it can raise from outside investors.
• B) When agency costs are significant, short-term debt may be the most attractive form of external financing.
• C) Too much debt can motivate managers and equity holders to take excessive risks or over-invest in a firm.
• D) Of all the different possible imperfections that drive capital structure, the most clear-cut, and possibly the most significant, is taxes.

---

Definitions:

Symptom-Exacerbation

The deterioration or aggravation of a disease or condition's symptoms.

Masked

Concealed or hidden, often referring to emotions, intentions, or symptoms that are not visibly apparent or are deliberately obscured.

Placebo

A substance or treatment which is designed to have no therapeutic value, commonly used as a control in testing new drugs.

Correlation Coefficient

A statistical measure that describes the degree to which two variables move in relation to each other, ranging from -1 to 1.