Question

Which one of the following statements is true? Group of answer choices Debt increases the possibility of financial distress. Bondholders are generally granted voting rights equal to those of common shareholders. Unpaid common stock dividends can force a firm into liquidation. Payments of both interest and dividends are tax-deductible as business expenses. Debt holders have a residual claim on a firm's assets.

Answer 1

Debt increases the possibility of financial distress.

Step-by-step explanation:

Debt overstretches the firm and causes unnecessary stress. It does not put into consideration the profits made, if it is high or low, because, it must be paid constantly.

More devastatingly, there is a greater possibility of financial distress, especially when the firm experiences an economic crisis.