Which of the Following Statements Is False

question 86

Multiple Choice

Which of the following statements is false?

• A) Firms with high R&D costs and future growth opportunities typically maintain high debt levels.
• B) The tradeoff theory explains how firms should choose their capital structures to maximize value to current shareholders.
• C) With tangible assets, the financial distress costs of leverage are likely to be low, as the assets can be liquidated for close to their full value.
• D) Proponents of the management entrenchment theory of capital structure believe that managers choose a capital structure to avoid the discipline of debt and maintain their own job security.

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Definitions:

Interest

The cost of borrowing money or the payment received for the use of money, typically expressed as an annual percentage rate.

Original Principal

The initial amount of money borrowed or invested, not including any interest or earnings.

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, thereby eroding purchasing power.

Future Date

A specified time in the future, often used in the context of planning, forecasting, or setting deadlines.