Which of the following statements is FALSE?
A)Investors can alter the leverage choice of the firm to suit their personal tastes either by borrowing to reduce leverage or by holding bonds to add more leverage.
B)On the market value balance sheet the total value of all securities issued by the firm must equal the total value of the firm's assets.
C)The market value balance sheet captures the idea that value is created by a firm's choice of assets and investments.
D)One application of MM Proposition I is the useful device known as the market value balance sheet of the firm.

Question

Quizplus · Accepted Answer

Investors cannot alter the leverage choice of the firm to suit their personal tastes by holding bonds to add more leverage. Holding bonds does not increase leverage as bonds are a type of debt and increase the liability side of the balance sheet, not the leverage.

Which of the Following Statements Is FALSE