Which of the following statements is descriptive of common stock?
A)Stockholders are considered creditors of a corporation.
B)The payment of dividends is required.
C)Dividends paid are an expense for the issuing corporation.
D)Issuing stock is less financially risky than issuing bonds.

Question

Quizplus · Accepted Answer

Issuing common stock is less financially risky for a corporation than issuing bonds because stock does not obligate the company to make fixed payments. Unlike bonds, which require regular interest payments and the return of principal, dividends on common stock are paid at the discretion of the company's board of directors and are not guaranteed.

Which of the Following Statements Is Descriptive of Common Stock