Which of the Following Statements Is False

question 34

Multiple Choice

Which of the following statements is false?

• A) If there is uncertainty regarding EBIT, then with a higher interest expense there is a greater risk that interest will exceed EBIT.
• B) Even for a firm with positive earnings, growth will affect the optimal leverage ratio.
• C) From a tax perspective, the firm's optimal level of debt is proportional to its current earnings.
• D) The optimal proportion of debt in the firm's capital structure will be higher, the higher the firm's growth rate.

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Definitions:

Time-Series Analysis

A statistical method that analyzes a sequence of data points, typically measured at successive times, to forecast future trends.

Product Differentiation

A marketing strategy where a company attempts to make its product appear unique from competitors' offerings in the eyes of consumers.

Customer Service

Activities and services provided by a company to support and enhance the satisfaction of its customers.

Competitive Prices

Pricing strategy that involves setting prices at the same level or slightly lower than competitors to attract customers.