Which of the Following Statements Is FALSE

question 97

Multiple Choice

Which of the following statements is FALSE?

• A)Firms with high R&D costs and future growth opportunities typically maintain high debt levels.
• B)The tradeoff theory explains how firms should choose their capital structures to maximize value to current shareholders.
• C)With tangible assets,the financial distress costs of leverage are likely to be low,as the assets can be liquidated for close to their full value.
• D)Proponents of the management entrenchment theory of capital structure believe that managers choose a capital structure to avoid the discipline of debt and maintain their own job security.

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Definitions:

Normative Influence

The pressure to conform to the expectations or norms of a group, influencing individuals to act in ways that are accepted by their social group.

Social Proof

A tendency to conform to what we believe respected others think and do.

Lowball

A sales technique where an item or service is initially offered at a lower price than is actually intended to be charged, after which the price is raised to increase profits.

Disney Vault

A term referring to the practice by The Walt Disney Company of putting its films into moratorium, making them unavailable for purchase for a specified period.