Which of the Following Statements Is FALSE

question 88

Multiple Choice

Which of the following statements is FALSE?

• A)An important consequence of leverage is the risk of bankruptcy.
• B)Whether default occurs depends on the cash flows,not on the relative values of the firm's assets and liabilities.
• C)Economic distress is a significant decline in the value of a firm's assets,whether or not it experiences financial distress due to leverage.
• D)Modigliani and Miller's results continue to hold in a perfect market even when debt is risky and the firm may default.

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Definitions:

Direct Labor

The work of factory employees that can be directly traced to the product being manufactured.

Direct Labor Variances

The difference between the expected (standard) cost of direct labor for actual production and the actual cost incurred.

Direct Labor

Direct labor involves the work of employees who are directly involved in producing goods or services, being a key factor in manufacturing costs.

Labor Efficiency Variance

The discrepancy in the actual worked hours versus the expected standard hours, multiplied by the standard rate for labor.