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 common stock 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

This statement is false as issuing equity also carries the risk of financial distress, as the company has to pay dividends to equity holders even in difficult financial times. Furthermore, unpaid common stock dividends can lead to legal action against the company, although they do not force liquidation.

Which of the Following Statements Is False