Which of the Following Statements Is FALSE

question 14

Multiple Choice

Which of the following statements is FALSE?

• A)In the event of default,the assets not pledged as collateral for outstanding bonds cannot be used to pay off the holders of subordinated debentures until all more senior debt has been paid off.
• B)Because more than one debenture might be outstanding,the bondholder's priority in claiming assets in the event of default,known as the bond's seniority,is important.
• C)When a firm conducts a subsequent debenture issue that has lower priority than its outstanding debt,the new debt is known as a subordinated debenture.
• D)Most debenture issues contain clauses restricting the company from issuing new debt with equal or lower priority than existing debt.

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Definitions:

Reasonable Damages

Compensation amounts deemed fair and proportional to the loss or injury sustained, recognizable by the court.

Obtaining Different Accountant

The process of hiring a new accountant or accounting firm, usually to replace the current one due to various reasons such as seeking different expertise or dissatisfaction with services.

Private Securities Litigation Reform Act

A 1995 U.S. federal law designed to increase the legal standards required for filing securities fraud lawsuits, aiming to reduce frivolous litigation.

Detect Illegal Acts

The process of identifying activities that are prohibited by law or regulations.