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:

Decision Tree Tools

Analytical tools used in decision-making that use a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility.

Simulation Models

Are computational tools used to imitate the operations of real-world processes or systems for the purpose of analysis or decision-making.

Setup Cost

The expenses associated with configuring or preparing equipment, machinery, or production lines for manufacturing a new product batch or type.

Operate

Operate refers to the process of controlling and managing the functions of systems, machinery, or organizations.