Which of the following statements is false?
A)Creditors do not have voting power.
B)Payment on interest on debt in considered an expense, while payment of dividends is a
Return on capital.
C)Unpaid debt is a liability of the ﬁrm, and if not paid, can result in liquidation of the ﬁrm.
Unpaid ordinary equity dividends cannot force liquidation.
D)One of the costs of issuing equity is the possibility of ﬁnancial distress, while no ﬁnancial
Distress is associated with debt.
E)None of the above.

Question

Quizplus · Accepted Answer

The statement that no financial distress is associated with debt is false. In fact, if a firm is unable to make its payments on debt, it can lead to default and bankruptcy, which is a form of financial distress.

Which of the Following Statements Is False