Which of the Following Statements Is Not Descriptive of Common

question 165

Multiple Choice

Which of the following statements is not descriptive of common stock?

• A) Stockholders are considered owners,not creditors,of a corporation.
• B) The payment of dividends is never required.
• C) Dividends paid are an expense for the issuing corporation.
• D) Issuing stock is less risky than issuing bonds.

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Definitions:

Contra-Revenue

An account on a company's income statement that deducts from gross revenue to arrive at net revenue, including returns, allowances, and discounts.

Bad Debts Expense

This represents the cost associated with accounts receivable that a company deems uncollectible and writes off as a loss.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including material and labor costs.

Income Statement

An income statement is a financial statement that reports a company's financial performance over a specific accounting period, detailing revenues and expenses to show net profit or loss.