It Is True That

question 59

Multiple Choice

It is true that:

• A) shareholders have the protection of limited liability.
• B) in most insolvent companies, ordinary shareholders receive little or nothing back on winding up.
• C) shareholders have a legal entitlement to be paid a dividend once a year.
• D) A and B are true.

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Definitions:

360-Day Year

An accounting simplification that assumes there are 360 days in a year to facilitate easier interest calculations.

Direct Write-Off Method

An accounting practice where bad debts are written off against income at the time they are determined to be uncollectible, instead of being provided for in advance.

Account Receivable

Funds that customers owe a company for products or services provided on credit.

Dishonored Note

A promissory note that has not been paid by the maker at the maturity date.