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A100 Exam 2 Latest Update Exam | Questions and Verified
Answers | 100% Correct | Grade A +
Equity Inestors - ANSWER Contributions from Owners (for a
corporation = stockholders). Earnings retained from profitable
business operations (Retained Earnings).
Debt Investors - ANSWER Creditors of the business, such as a
bank, bond holders, leasing companies.
Reported as current "liabilities" or "long term liabilities" on the
financial statements.
Both Principal & Interest must be paid.
Legal Rights for Equity Investors - ANSWER If we contribute
funds to our company, then we will be awarded shares of
ownership (stockholders).
By investing our funds in our company, we hope the business
uses our investment to generate profits.
Risks for Equity Investors - ANSWER Stockholders face the risk
of not receiving a satisfactory return on their investment.
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Sometimes investors can lose some or all of the investment if
the business fails.
Stockholders may expect dividend payments that are not tax
deductible.
Benefits for Equity Investors - ANSWER Stockholders may enjoy
increases in value of shares.
Stockholders may enjoy dividends if awarded by the Board of
Directors.
Legal Rights for Debt Investors - ANSWER Both interest (tax
deductible) and principal must be paid.
If our company does not make payments, the creditor has legal
recourse to "call" the loan and demand payment.
Risks for Debt Investors - ANSWER With borrowing funds from a
creditor, there is a financial risk that we may not be able to
make payments on time.
Sometimes companies have to liquidate assets to make
payments.
Liquidating assets may cause our company to file for
bankruptcy.
A100 Exam 2 Latest Update Exam | Questions and Verified
Answers | 100% Correct | Grade A +
Equity Inestors - ANSWER Contributions from Owners (for a
corporation = stockholders). Earnings retained from profitable
business operations (Retained Earnings).
Debt Investors - ANSWER Creditors of the business, such as a
bank, bond holders, leasing companies.
Reported as current "liabilities" or "long term liabilities" on the
financial statements.
Both Principal & Interest must be paid.
Legal Rights for Equity Investors - ANSWER If we contribute
funds to our company, then we will be awarded shares of
ownership (stockholders).
By investing our funds in our company, we hope the business
uses our investment to generate profits.
Risks for Equity Investors - ANSWER Stockholders face the risk
of not receiving a satisfactory return on their investment.
, 2|Page
Sometimes investors can lose some or all of the investment if
the business fails.
Stockholders may expect dividend payments that are not tax
deductible.
Benefits for Equity Investors - ANSWER Stockholders may enjoy
increases in value of shares.
Stockholders may enjoy dividends if awarded by the Board of
Directors.
Legal Rights for Debt Investors - ANSWER Both interest (tax
deductible) and principal must be paid.
If our company does not make payments, the creditor has legal
recourse to "call" the loan and demand payment.
Risks for Debt Investors - ANSWER With borrowing funds from a
creditor, there is a financial risk that we may not be able to
make payments on time.
Sometimes companies have to liquidate assets to make
payments.
Liquidating assets may cause our company to file for
bankruptcy.
