ABC Corporation Is Financed by Both Debt and Equity

question 73

Multiple Choice

ABC Corporation is financed by both debt and equity.In its shareholder agreement, it promises to pay monthly dividends to all shareholders.Recently, it has come into some financial trouble and is having trouble making payments.Which of the following is true?

• A)ABC should pay dividends or risk bankruptcy.
• B)ABC should pay its creditors or risk bankruptcy.
• C)ABC must pay dividends or it risks being sued for breach of contract.
• D)ABC must pay both dividends and its creditors or risk bankruptcy.
• E)ABC should declare bankruptcy now to avoid any obligations it currently has.

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Definitions:

Estimator

A rule or method for estimating a parameter from sample data.

Confidence Level

The degree of certainty, usually expressed as a percentage, that a parameter lies within a specified range of values.

Estimation

The process of finding an approximate value of some parameter—such as a mean, variance, or proportion—from a sample data set.

Population Parameters

Numeric characteristics or measures that describe an aspect of a population.