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:

Sunlight

is the natural light of the sun, essential for photosynthesis in plants and influencing Earth's climate and weather patterns.

Electromagnetic Radiation

A form of energy that is propagated through space or through a material medium in the form of electromagnetic waves, such as light, radio waves, and X-rays.

Ultraviolet Waves

Electromagnetic waves with wavelengths shorter than visible light, harmful to skin and eyes but essential for Vitamin D synthesis in humans.

Organic Compounds

Chemical compounds primarily made of carbon atoms bonded with other elements such as hydrogen, oxygen, and nitrogen, found in all living organisms.