Which of the Following Statements Is True

question 41

Multiple Choice

Which of the following statements is true?

• A)subordinated debt ranks above ordinary shareholders in the event of liquidation.
• B)unsubordinated debt takes a lower ranking than other debt of similar characteristics.
• C)subordinated debt ranks above other similar classes of debt in the event that a firm is liquidated.
• D)all of the above.

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Definitions:

Payback Period

The duration it takes for an investment to generate enough cash flow to recover its initial cost.

Average Accounting Returns

A financial ratio that measures a firm's average profitability relative to its investment, typically calculated as net income divided by average book value of investment.

Project

A systematically planned group of tasks that are interdependent, meant to be executed within a fixed timeframe whilst respecting certain financial and additional limits.

Mutually Exclusive Projects

Projects in which the acceptance of one proposal means the others cannot be pursued, requiring a choice to be made.