Which of the following statements is incorrect?
A)Current assets are expected to be converted into cash sooner than noncurrent assets.
B)Equity investors have unlimited downside exposure if the company declares bankruptcy.
C)Paid-in capital of company is not affected by the payment of dividends.
D)Retained earnings at the inception of a company equals zero.

Question

Quizplus · Accepted Answer

Equity investors, unlike debt holders, have limited liability, meaning their downside risk in the event of a company's bankruptcy is limited to the amount of their investment in the company's stock. They do not have unlimited downside exposure, as their personal assets are not at risk.

Which of the Following Statements Is Incorrect