Question

Which ONE of the following is NOT a characteristic of equity financing? Group of answer choices A right to share in the profits of the business A right to share in any remaining resources when the business is terminated A right to force the business into bankruptcy if dividends are not paid A right to have a say in the affairs of the business

Answer 1

Answer:

A right to force the business into bankruptcy if dividends are not paid.

Explanation:

These are the characteristics of Equity Financing:

-Maturity. Equity funding does not need to be repaid.

-Claim on income. At management´s discretion and if the company is profitable, shareholders may receive dividends after creditors have been paid.

-Claim on assets. Shareholders have claims only after the firm satisfies claims of lenders.

-Influence over management. As owner of the company, shareholders can vote on some aspects of corporate operations, although in practice only large shareholders have much influence. Private equity holders can have considerable influence.