Which of the Following Does Not Represent a Major Difference

question 38

Multiple Choice

Which of the following does not represent a major difference between debt and equity?

• A) Creditors do not have voting power as stockholders do.
• B) Payment on interest on debt in considered an expense, while payment of dividends is not.
• C) Unpaid debt is a liability of the firm, and if not paid, can result in liquidation of the firm. Unpaid dividends cannot.
• D) One of the costs of issuing equity is the possibility of financial distress, while no financial distress is associated with debt.

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Definitions:

Government Inefficiency

Occurs when government actions result in wasted resources, over-expending, or achieving outcomes that do not maximize social welfare.

Production Cost

The total expense incurred in manufacturing a product or providing a service, including raw materials, labor, and overheads.

Remittances

Money sent back home by migrants to family members in their country of origin.

Emigrants

Individuals who leave their country of origin to live permanently in another country.