Which of the Following Does Not Represent a Major Difference

question 38

Multiple Choice

Which of the following does not represent a major difference between debt and equity?

• A) Creditors do not have voting power as stockholders do.
• B) Payment on interest on debt in considered an expense, while payment of dividends is not.
• C) Unpaid debt is a liability of the firm, and if not paid, can result in liquidation of the firm. Unpaid dividends cannot.
• D) One of the costs of issuing equity is the possibility of financial distress, while no financial distress is associated with debt.

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Definitions:

Non-Negative Profit

A profit that is zero or positive, indicating that a business is not losing money.

Economic Profit

The financial gain obtained by a firm or individual after subtracting all explicit and implicit costs from total revenue, often indicating the efficiency and profitability of business operations.

Short Run

A time period in economics during which at least one input is fixed while others are variable.

Produce

Fresh agricultural products such as fruits, vegetables, and other food crops that are grown and harvested.