Commerce Exam > Commerce Questions > Which of the following is false?a)Equity is o...
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Which of the following is false?
- a)Equity is owners’ stake and the debenture is a debt
- b)Rate of interest on debentures is fixed
- c)Debenture holders get preferential treatment over the equity holders at the time of liquidation
- d)Interest on debentures is an appropriation of profits.
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Which of the following is false?a)Equity is owners stake and the deben...
False Statement: Interest on debentures is an appropriation of profits.
Explanation:
There are four statements given, and we need to determine which one is false. Let's analyze each statement:
A: Equity is owners' stake and the debenture is a debt:
- This statement is true. Equity represents ownership in a company, while debentures are a form of debt.
B: Rate of interest on debentures is fixed:
- This statement is true. Debentures typically have a fixed rate of interest that is agreed upon at the time of issuance.
C: Debenture holders get preferential treatment over the equity holders at the time of liquidation:
- This statement is true. In the event of liquidation, debenture holders have a higher claim on the company's assets compared to equity holders.
D: Interest on debentures is an appropriation of profits:
- This statement is false. Interest on debentures is a liability for the company and is typically treated as an expense in the income statement. It is not considered an appropriation of profits.
Therefore, the false statement is D: Interest on debentures is an appropriation of profits.
Explanation:
There are four statements given, and we need to determine which one is false. Let's analyze each statement:
A: Equity is owners' stake and the debenture is a debt:
- This statement is true. Equity represents ownership in a company, while debentures are a form of debt.
B: Rate of interest on debentures is fixed:
- This statement is true. Debentures typically have a fixed rate of interest that is agreed upon at the time of issuance.
C: Debenture holders get preferential treatment over the equity holders at the time of liquidation:
- This statement is true. In the event of liquidation, debenture holders have a higher claim on the company's assets compared to equity holders.
D: Interest on debentures is an appropriation of profits:
- This statement is false. Interest on debentures is a liability for the company and is typically treated as an expense in the income statement. It is not considered an appropriation of profits.
Therefore, the false statement is D: Interest on debentures is an appropriation of profits.
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Which of the following is false?a)Equity is owners stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profits.Correct answer is option 'D'. Can you explain this answer?
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