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Questions and Answers
What is the primary purpose of dividends for stockholders?
What is the primary purpose of dividends for stockholders?
- To decrease the company's equity
- To increase the company's debt
- To provide a return on their investment (correct)
- To guarantee future stock price increase
What distinguishes creditors from stockholders?
What distinguishes creditors from stockholders?
- Creditors become owners of the business
- Creditors have the legal right to receive back the principal and interest payments (correct)
- Stockholders have the legal right to receive back the principal and interest payments
- Stockholders do not have the legal right to receive back the principal and interest payments
What is the main way a company can raise funds through 'debt'?
What is the main way a company can raise funds through 'debt'?
- Selling company assets
- Borrowing money from investors or banks (correct)
- Acquiring other companies
- Issuing new shares of stock
What is the significance of a company paying dividends every year?
What is the significance of a company paying dividends every year?
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How do equity investors differ from debt investors?
How do equity investors differ from debt investors?
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