Which of the Following Statements Is FALSE

question 4

Multiple Choice

Which of the following statements is FALSE?

• A)Calculating the precise present value of financial distress costs is a relatively straightforward process.
• B)Two key qualitative factors determine the present value of financial distress costs: (1)the probability of financial distress and (2)the magnitude of the costs after a firm is in distress.
• C)Technology firms are likely to incur high costs when they are in financial distress,due to the potential for loss of customers and key personnel,as well as a lack of tangible assets that can be easily liquidated.
• D)The magnitude of the financial distress costs will depend on the relative importance of the sources of these costs and is likely to vary by industry.

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Definitions:

Small Corporations

These are businesses that are smaller in size, often categorized by fewer employees or lower annual revenue.

Income

The flow of cash or its equivalent received from work or investments over time.

Investment

The allocation of resources, usually financial, to assets or projects expected to generate future profits or benefits.

Exxon-Mobil

An American multinational oil and gas corporation that was formed by the merger of Exxon and Mobil in 1999, one of the largest publicly traded oil and gas companies by market capitalization.