Question:
Which of the following is a reason why equity capital is considered riskier than debt capital?
A) Equity capital has a higher priority claim against assets and earnings.
B) Equity capital remains invested in a firm indefinitely.
C) Equity capital expects dividend payments which are not tax-deductible.
D) Equity capital requires regular periodic payments in the form of dividends.
Going Concern Principle:
According to the principle of going concern, an entity is assumed to continue its business unless it becomes unable to carry on the regular business activities due to a change in law or any other operational problems.
Answer and Explanation:1
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The correct option is B
Equity Capital remains in the business until it is dissolved. Equity stockholders are owners of a firm, unlike debt holders....
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