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(Part 1)Which of the following is TRUE regarding the differences between debt and common stock? a.Debt...

(Part 1)Which of the following is TRUE regarding the differences between debt and common stock?
a.Debt is ownership in a firm but equity is not.
b.Creditors have voting power while Common Stockholders do not.
c.Periodic payments made to bond holders are tax deductible for the issuer.
d.Dividend payments are legally binding while interest payments generally are not.


(Part 2)Which of the following is FALSE regarding the differences between debt and common stock?
a.Equity is ownership in a firm but debt is not.
b.Creditors have voting power while Common Stockholders do not.
c.Periodic payments made to bond holders are tax deductible for the issuer.
d.Interest payments are legally binding while dividend payments generally are not.

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Answer #1

Part 1)

Option 'C' is correct

Periodic payments to bondholders are tax deductible for the issuer. Interest payments made to Bondholders are tax deductible.

Equity is the ownership in the company and debt is the liability to the company and company is legally bound to pay periodic interest payments to Debt holders. Equity shareholders have voting power.

Part 2)

Option 'B' is correct

Creditors have voting power while common stockholders do not. is False because creditors do not have voting power where as Common stock holders have voting power.

Equity is the ownership in the company and debt is the liability to the company and company is legally bound to pay periodic interest payments to Debt holders. Equity shareholders have voting power.

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