2 Question 12 (10 points) Highly levered firms have a greater tendency to lay off workers and reduce employment in response to a short-term reduction in demand. 5 6 a) True b) False 8 9 Question 13 (10 points) Saved Firms in financial distress are more careful about their reputation. 11 12 14 15 a) True b) False Question 14 (10 points) Managers of a leveraged firm in bankruptcy would prefer not to liquidate. a) True; liquidation implies reduction in uncertainty b) False; liquidation will provide funds to pay off the firm's debt Student Presentation Questions