Which of the Following Statements Is FALSE

question 20

Multiple Choice

Which of the following statements is FALSE?

• A)One disadvantage of using leverage is that it does not allow the original owners of the firm to maintain their equity stake.
• B)The separation of ownership and control creates the possibility of management entrenchment;facing little threat of being fired and replaced,managers are free to run the firm in their own best interests.
• C)Managers also have their own personal interests,which may differ from those of both equity holders and debt holders.
• D)The costs of reduced effort and excessive spending on perks are another form of agency cost.

---

Definitions:

Ownership

The legal right or title to control and use property, assets, or resources, including the responsibilities and benefits that come with it.

Sales Response Function

Relates the expense of the marketing effort to the marketing results obtained.

U-shaped

Refers to a pattern or layout that resembles the letter “U,” often used to describe the configuration of tables, desks, or other arrangements.

S-shaped

A term often used to describe a curve or growth pattern that starts slowly, accelerates, and then slows down again, resembling the letter "S."