Which of the Following Statements Is FALSE

question 56

Multiple Choice

Which of the following statements is FALSE?

• A)The most important insight regarding capital structure goes back to Modigliani and Miller: With perfect capital markets,a firm's security choice alters the risk of the firm's equity,but it does not change its value or the amount it can raise from outside investors.
• B)When agency costs are significant,short-term debt may be the most attractive form of external financing.
• C)Too much debt can motivate managers and equity holders to take excessive risks or over-invest in a firm.
• D)Of all the different possible imperfections that drive capital structure,the most clear-cut,and possibly the most significant,is taxes.

---

Definitions:

Openness-Closedness

A dimension of personality that describes the degree to which a person is open to experiencing a variety of activities or is closed and prefers familiarity.

Self-Efficacy

The belief in one's abilities to succeed in specific situations or accomplish a task.

Defensive Self-Esteem

A form of self-esteem characterized by fragility and sensitivity to criticism, often resulting in aggressive or defensive reactions to perceived threats to self-image.

Collectivism

A cultural value that emphasizes group goals, interdependence, and the importance of cohesion within social groups.