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:

Activity Variance

The difference between the planned activity level of cost-driving activities and the actual level incurred, impacting the budget or costing analysis.

Materials

Items or substances used in the production or manufacturing of goods.

Personnel Expenses

Costs associated with employing personnel, including wages, benefits, training, and other related expenses.

Spending Variance

A metric that compares the actual cost of production against the budgeted or standard cost, highlighting over or under spending.