Which of the Following Statements Is False

question 17

Multiple Choice

Which of the following statements is false?

• A) One disadvantage of using leverage is that it does not allow the original owners of the firm to maintain their equity stake.
• B) The separation of ownership and control creates the possibility of management entrenchment; facing little threat of being fired and replaced, managers are free to run the firm in their own best interests.
• C) Managers also have their own personal interests, which may differ from those of both equity holders and debt holders.
• D) The costs of reduced effort and excessive spending on perks are another form of agency cost.

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Definitions:

Low Power Distance

A cultural dimension where individuals prefer a more equal distribution of power and reject hierarchical structures.

Power Distance

A cultural dimension that describes the extent to which less powerful members of institutions and organizations expect and accept that power is distributed unequally.

New Zealand

A country located in the southwestern Pacific Ocean, known for its diverse ecosystems, indigenous Maori culture, and picturesque landscapes.

Power Distance

A cultural dimension that describes the extent to which individuals in a society accept and expect power to be distributed unequally.