When a Personal Guarantee Has Been Signed by a Shareholder

question 124

True/False

When a personal guarantee has been signed by a shareholder, the creditor can demand payment from that shareholder despite the separate legal entity nature of the corporation.

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Definitions:

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company's operating activities is used, as opposed to the indirect method.

Accounts Payable

Short-term liabilities owed to suppliers or creditors for goods and services received but not yet paid for.

Financing Activities

Refers to the transactions and events through which a business raises funds to operate and expand, including issuing shares, taking on loans, or issuing bonds.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the balance sheet.