Which of the following statements is false? If the corporation fails to satisfy

Question

Which of the following statements is false? If the corporation fails to satisfy debt holders' claims, debt holders may lose control of the firm. Because a corporation is a separate legal entity, when it fails to repay its debts, the people who lent to the firm, the debt holders are entitled to seize the assets of the corporation in compensation for the default. As long as the corporation can satisfy the claims of the debt holders, ownership remains in the hands of the equity holders. In bankruptcy, management is given the opportunity to reorganize the firm and renegotiate with debt holders.

Explanation / Answer

Answer A. If the corporation fails to satisfy debt holders' claims, debt holders may lose control of thefirm.

If the corporation fails to satisfy debt holders' claims, debt holders may take control of the firm

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