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Which of the following statements is FALSE? A. Long term debt agency cost are the smallest. B. Creditors can reduce agency cost and prevent management
Which of the following statements is FALSE?
A. Long term debt agency cost are the smallest.
B. Creditors can reduce agency cost and prevent management from exploiting them through the use of covenants.
C. Debt covenants are restrictions that creditors place on the managers of the firms that restricts their actions within the firm.
D. The firm may be restricted through covenants the types of investment that the firm can make and amount of dividend that is paid to shareholders.
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