Which of the Following Statements Is False

question 7

Multiple Choice

Which of the following statements is false?

• A) Controlling shareholders pay for their control rights because the firm effectively faces a higher cost of equity for outside capital.
• B) Most countries follow what is called the stakeholder model, giving explicit consideration to other stakeholders-in particular, rank-and-file employees.
• C) In a pyramid structure, a family first creates a company in which it owns more than 50% of the shares and therefore has a controlling interest.
• D) A conflict of interest arises because the family has an incentive to try to move profits (and hence dividends) down the pyramid-that is, toward companies in which it has few cash flow rights and away firms in which it has more cash flow rights.

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Definitions:

Contribution Format

A method of income statement presentation where costs are separated into variable and fixed categories, emphasizing the contribution margin.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues and expenses.

Margin of Safety Percentage

The difference between actual sales and break-even sales, expressed as a percentage of actual sales.

Contribution Format

An income statement format that distinguishes between fixed and variable costs, highlighting the contribution margin.