Which of the Following Statements Is False

question 37

Multiple Choice

Which of the following statements is false?

• A) By relying on short-term debt the firm exposes itself to funding risk, which is the risk of incurring financial distress costs should the firm not be able to refinance its debt in a timely manner or at a reasonable rate.
• B) An ultra-conservative policy would involve financing even some of the plant, property, and equipment with short-term sources of funds.
• C) With a conservative financing policy, the firm would use short-term debt very sparingly to meet its peak seasonal needs.
• D) Short-term debt can have lower agency and lemons costs than long-term debt, and an aggressive financing policy can benefit shareholders.

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Definitions:

Retrieval Cue

A stimulus that allows for the recall of information stored in the long-term memory.

Tip-Of-The-Tongue

A cognitive phenomenon where a person cannot recall a specific word or fact despite feeling that retrieval is imminent.

Flashbulb Memory

Highly detailed and vivid memories of momentous events, which are often remembered with high confidence but not always with accurate detail.

Executive Control System

A cognitive system in the brain responsible for the regulation of thought and action through supervisory attentional control.