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Homework answers / question archive / Of the following statements, the ones that are true include: (I) Debt is a residual claim on a firm's revenue (II) Equity has the lowest priority in capital structure (III) Debtholders can control how managers make decisions to always increase firm value (IV) Debt is not a fixed claim on a firm's assets (V) Interest payments for debt are tax deductible for the firm (VI) Debt is usually issued with a fixed maturity date

Of the following statements, the ones that are true include: (I) Debt is a residual claim on a firm's revenue (II) Equity has the lowest priority in capital structure (III) Debtholders can control how managers make decisions to always increase firm value (IV) Debt is not a fixed claim on a firm's assets (V) Interest payments for debt are tax deductible for the firm (VI) Debt is usually issued with a fixed maturity date

Finance

Of the following statements, the ones that are true include:

(I) Debt is a residual claim on a firm's revenue

(II) Equity has the lowest priority in capital structure

(III) Debtholders can control how managers make decisions to always increase firm value

(IV) Debt is not a fixed claim on a firm's assets

(V) Interest payments for debt are tax deductible for the firm

(VI) Debt is usually issued with a fixed maturity date

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I) Debt is a residual claim on a firm's revenue is wrong (because equity claims are residual claim. A claim to a share of earning after debt obligation have been satisfied)

II) Equity has the lowest priority in capital structure is correct (because debt holders are given more priority than equity shareholders. Cost of debt is cheaper than the cost of equity and it is less risky, so many company keeps the percentage of debt more in there capital structure, the interest amount is also fixed and hence they are paid on priority)

III) Debtholders can control how managers make decisions to always increase firm value is wrong( because they are creditors and doesnot have voting rights)

IV) Debt is not a fixed claim on a firm's assets is wrong( because under these investment, public lends money to the government/ organization in return for an agreed rate of interest. Investors can use them to get a said return paid at regular intervals)

V) Interest payments for debt are tax deductible for the firm is right.

VI) Debt is usually issued with a fixed maturity date is correct ( because government/various organization issue these funds to raise funds by attracting over assured and low return. To enable high issuance, a fixed maturity date is included)