Debt Is Given Preference Over Equity to Receive Payments Because

question 11

Multiple Choice

Debt is given preference over equity to receive payments because:

• A) debt returns a higher payment
• B) equity fluctuates with the market
• C) debt has legal obligations
• D) there is no preference

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Definitions:

Payable to Order

A financial term indicating that a payment should be made to a specific individual or entity whose name appears on the document.

Drawer

In banking and finance, the person who writes or issues a check or draft, instructing the bank to pay a specified amount to the person or entity named.

Contractual Capacity

The legal ability to enter into a binding contract, typically requiring parties to be of a certain age and sound mind.

Negotiation

The process whereby two or more parties discuss and attempt to reach a mutual agreement on matters of common interest.