Which of the Following Is True About the Differences Between

question 88

Multiple Choice

Which of the following is true about the differences between debt and common stock?

• A) Debt is ownership in a firm but equity is not.
• B) Creditors have voting power while stockholders do not.
• C) Periodic payments made to either class of security are tax deductible for the issuer.
• D) Interest payments are promised while dividend payments are not.
• E) Bondholders can also own equity, but not vice versa.

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Definitions:

Marginal Revenue Product

The extra income produced by the use of an additional unit of a resource, for example, labor or capital.

Unit of Output

A quantifiable amount of goods or services produced by a firm, industry, or economy.

Labor Hire

The process of employing workers, often on a temporary basis, to perform certain jobs or tasks.

Marginal Productivity

is the additional output resulting from using one more unit of a particular input, holding all other inputs constant.