Which of the Following Is the Major Difference Between the Accounting

question 90

Multiple Choice

Which of the following is the major difference between the accounting for equity securities and debt securities?

• A)Debt securities are classified as liabilities, while equity securities are classified as assets.
• B)Most equity securities are classified as held-to-maturity and most debt securities are classified as trading investments.
• C)The revenue from debt securities is interest, while revenue from equity securities is dividends.
• D)All debt securities have a maturity date whereas only a few equity securities have a maturity date.

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Definitions:

Cost of Equity

The return that investors require for an investment in a firm's equity, representing the compensation for bearing risk.

Growth Rate

The rate at which a company's earnings or revenue increases over a specified period.

Required Return

The minimum rate of return that investors expect or require from an investment to make it worthwhile.

Annual Dividend

The total dividend payment a company makes to its shareholders in a year.