Which of the following is not an accurate statement regarding the distinction between debt and equity?
A) Only equity is considered a source of financing for operations of the business, since debt must be repaid at a specified maturity date.
B) If a business ceases operations and liquidates, claims of all creditors have legal priority over claims of the shareholders.
C) Most debt requires the borrower to pay interest; equity financing does not obligate the company to make a specified payment.
D) The providers of equity are owners of the business; the providers of borrowed funds are creditors.

Question

Quizplus · Accepted Answer

Both debt and equity can be sources of financing for operations of the business. Additionally, while debt does have a specified maturity date, equity also has a perceived return expectation by investors. Therefore, statement A is not accurate.

Which of the Following Is Not an Accurate Statement Regarding