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:

Next Speaker

The subsequent individual scheduled to speak or present in a sequence of events.

Equipment

Machinery, tools, or devices necessary for the completion of a task.

Problem/Causes/Solution Pattern

A method of organizing information in communication that identifies issues, their reasons, and proposed fixes.

Symptoms

Signs or indications of the existence of a problem, illness, or specific condition.