Which of the Following Statements Is FALSE

question 36

Multiple Choice

Which of the following statements is FALSE?

• A)By including more covenants,issuers increase their costs of borrowing.
• B)Once bonds are issued,equity holders have an incentive to increase dividends at the expense of debt holders.
• C)Covenants may restrict the level of further indebtedness and specify that the issuer must maintain a minimum amount of working capital.
• D)If the covenants are designed to reduce agency costs by restricting management's ability to take negative NPV actions that exploit debt holders,then the reduction in the firm's borrowing cost can more than outweigh the cost of the loss of flexibility associated with covenants.

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Definitions:

Unspecified

This term indicates that certain details or aspects are not specified or determined.

Diagnostic Criteria

The specific symptoms and features used by clinicians to diagnose and classify mental health disorders and diseases accurately.

Specify Severity

The process of detailing the seriousness or intensity of an issue or condition.

DSM-5 Diagnosis

The process of identifying mental health disorders based on criteria set in the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition.