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:

American College of Sports Medicine (ACSM)

A professional organization that promotes and integrates scientific research, education, and practical applications of sports medicine and exercise science to improve health and performance.

Cognitive Declines

The process of deterioration in cognitive function, which may include memory, problem-solving, and attention.

Gastric Juices

Stomach secretions that aid in digestion.

Digestion

The biological process by which food is broken down into simple nutrients to be absorbed and used by the body.