A Debt Based Solely on the Debtor's Promise to Pay

question 1

Multiple Choice

A debt based solely on the debtor's promise to pay is a(n)

• A) secured debt.
• B) unsecured debt.
• C) lien.
• D) garnishment.

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Definitions:

Flotation Costs

The costs associated with issuing new securities, including underwriting, legal, and registration fees.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its shareholders as dividends.

Constant Dividend

A policy of distributing a fixed amount of dividend per share to shareholders, regardless of the company's earnings variations over time.

Cost of Retained Earnings

This represents the opportunity cost for a company of using its retained earnings for investment purposes rather than distributing them as dividends.