Which of the Following Statements Is False

question 7

Multiple Choice

Which of the following statements is false?

• A) Leverage can reduce the degree of managerial entrenchment because managers are more likely to be fired when a firm faces financial distress.
• B) When a firm is highly levered, creditors themselves will closely monitor the actions of managers, providing an additional layer of management oversight.
• C) According to the empire building hypothesis, leverage increases firm value because it commits the firm to making future interest payments, thereby reducing excess cash flows and wasteful investment by managers.
• D) Managers of large firms tend to earn higher salaries, and they may also have more prestige and garner greater publicity than managers of small firms. As a result, managers may expand (or fail to shut down) unprofitable divisions, pay too much for acquisitions, make unnecessary capital expenditures, or hire unnecessary employees.

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Definitions:

Primary Categories

Fundamental classifications or groups into which various elements are organized based on shared characteristics or attributes.

Secondary Categories

Involves classifying items or information beyond primary distinctions, helping in detailed analysis and understanding of complex aspects.

Change Competency

Change competency refers to the ability of individuals or organizations to adapt effectively to new conditions or environments.

Indra Nooyi

Former CEO of PepsiCo and notable figure in the business world, recognized for her leadership and contributions to the industry.