(I)Firms Issue Common Stock in Far Greater Amounts Than Preferred

question 55

Multiple Choice

(I) Firms issue common stock in far greater amounts than preferred stock.
(II) In a given year,the total volume of stock issued is much less than the volume of bonds issued.

• A) (I) is true, (II) false.
• B) (I) is false, (II) true.
• C) Both are true.
• D) Both are false.

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Definitions:

Unsecured Creditors

Creditors who have lent money without taking any collateral, thus bearing a higher risk in case of debtor's default.

Liabilities With Priority

Obligations that are given preference over other liabilities in the case of liquidation or bankruptcy, often secured or legally mandated.

Liquidation

The process of closing down a business by selling its assets to pay off its debts, with any leftovers being distributed to shareholders.

Reorganization

The act of restructuring a company's business or legal structure, often for reasons related to improving the company's operations, efficiency, or to adjust to financial instability.