Dividends Reduce the Value of Lender Claims, and This Is

question 1

True/False

Dividends reduce the value of lender claims, and this is why bondholders often limit a firm's ability to distribute cash to equity holders.

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Definitions:

Bank Overdrafts

A facility provided by a bank allowing an account holder to withdraw more money than is available in their account, often used as a form of short-term financing.

Goodwill Calculation

The process used to assess the premium paid over the fair market value of the assets during the acquisition of a company.

Form 20-F

A form used by foreign companies to report their financial performance and operational activities to the U.S. Securities and Exchange Commission.

Annual Report

A comprehensive report on a company's activities and financial performance throughout the preceding year.