Shareholders Are Said to Have a Residual Claim on the Firm's

question 39

Multiple Choice

Shareholders are said to have a residual claim on the firm's assets.What does this mean?

• A) Shareholders have limited liability in their investment.
• B) Shareholders do not receive any payoff from the firm until all creditors are paid.
• C) Shareholders are allowed to recover their investment first if the firm experiences financial distress.
• D) Shareholders have priority in electing the board of directors for the firm.

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Definitions:

Labor

The human effort, whether physical or mental, used in the production of goods and services.

Output

The total amount of goods or services produced by a firm, industry, or economy.

Cost

The total expenditure required to produce a good or service, including materials, labor, and other expenses.

Units

Units refer to the basic measure or quantity of a product, service, or the fundamental quantity used in measurement.