Dividends Reduce the Value of Lender Claims, and This Is

question 72

True/False

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

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Definitions:

Conditions Precedent

Specific conditions outlined in a contract that must be met before a party is required to fulfill their part of the agreement.

Conditions Subsequent

Contractual clauses that stipulate certain events or actions must occur or fail to occur, which will terminate an existing obligation or contract.

Nominal Conditions

Conditions in name only, having little to no impact on the terms or outcome of a contract or agreement.

Specific Performance

A legal remedy in contract law that requires a party to perform their obligations under a contract, rather than only compensating the other party with money.