Which of the Following Statements Is FALSE

question 97

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:

Break-Even Point

The point at which total costs equal total revenue, resulting in no profit but also no loss.

Mixed Costs

Expenses that contain both variable and fixed cost elements, changing in total with the level of activity but not in direct proportion.

Direct Materials

Raw materials that are directly traceable and integral to the finished product in the manufacturing process.

Production Costs

The total expenses incurred in the process of producing or manufacturing goods, including raw materials, labor, and overhead costs.