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:

Self-serving Bias

The tendency to attribute personal successes to internal factors while attributing failures to external factors.

Attribution Theory

A concept in social psychology that explores how individuals infer the causes of others' behavior, attributing it to either internal dispositions or external situations.

Internal And External Attributions

The process of explaining one's own behavior and the behavior of others by attributing causes to internal dispositions or to external situations.

Attribution Errors

Cognitive biases that occur when an individual incorrectly assigns cause or blame to events based on their perception, often overlooking external factors.