Question

Which of the following is a feature of equity?

a. Dividend payments are contractual

b. Dividend payments are tax deductible

c. It represents a claim against the firm's assets in liquidation

d. It has an infinite life

e. It has a fixed maturity date

Answer 1

a. FALSE
There is no fixed rate of dividend on equity shares.
b. FALSE
From the point of view of the issuing company,
dividend payments are not tax deductible.
c. FALSE
Equity shareholders do have a claim on the assets of
the company in the case of liquidation.
However, they are last in line after bondholders,
and preferred shareholders.
Equity shares are issued with no maturity date and have an infinite life.
d. TRUE
e. FALSE.
The following is a feature of equity:
d. It has an infinite life