Homework answers / question archive / 8) Which of the following is NOT TRUE about equity and debt? a) Equity holders are protected by limited liability and their claim on firm value is the residual amount that remains after the debt holders are paid

8) Which of the following is NOT TRUE about equity and debt? a) Equity holders are protected by limited liability and their claim on firm value is the residual amount that remains after the debt holders are paid

Business

Share With

8) Which of the following is NOT TRUE about equity and debt? a) Equity holders are protected by limited liability and their claim on firm value is the residual amount that remains after the debt holders are paid. b) Equity holders control the firm through voting rights and debt holders use the loan contracts to protect themselves. c) Interest payments for debt are tax-deductible for the corporation. Dividend of stocks is not tax-deductible for the corporation but tax-deductible for investors of the firm. d) Nonpayment of interest may result in creditors forcing the firm into bankruptcy. Therefore, firms should always issue equity instead of debt to finance their growing opportunities. e) None of the above