Which of the Following Statements Is FALSE

question 79

Multiple Choice

Which of the following statements is FALSE?

• A)Once bonds are issued, equity holders have an incentive to increase dividends at the expense of debt holders.
• B)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.
• C)Covenants may restrict the level of further indebtedness and specify that the issuer must maintain a minimum amount of working capital.
• D)By including more covenants, issuers increase their costs of borrowing.

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Definitions:

Athenian Model

Refers to the ancient Athenian democracy, characterized by direct participation of citizens in decision-making processes.

Portable Personal Identity

An individual's sense of self that is consistent and carried with them across different social contexts and interactions.

Geographically Fixed

Referring to entities, phenomena, or activities that are stationary and tied to a specific physical location.

Secularisation

The process by which religious institutions, practices, and beliefs lose their social significance.