Final answer:
Firms are not legally required to pay dividends to stockholders; it is at the discretion of the company's board of directors. Interest payments to lenders are mandatory, but dividend payments to shareholders are not.
Step-by-step explanation:
The statement 'Firms are legally required to pay dividends to stockholders just as they must make interest payments to lenders' is False. Firms have a legal obligation to make interest payments on their debts to lenders, but they are not under the same legal obligation to pay dividends to shareholders. Dividends are paid at the discretion of the company's board of directors. The decision to issue stock, pay dividends, or reinvest profits is generally made by the board of directors, which represents the interests of the shareholders. This process differs depending on whether a firm is private or public. Private companies have more flexibility as they are not subject to public shareholders. In contrast, public companies issuing stock to the public are responsible to a board of directors and must operate in the shareholders' interests, which could include issuing dividends if feasible.