In which of the following ways do debt and equity securities necessarily differ?
A) In their characteristic of being sources for corporate financing.
B) In whether they represent an ownership interest.
C) Voting rights.
D) Debt and equity securities do not differ in any of these ways.

Question

Quizplus · Accepted Answer

Debt securities represent a loan from the investor to the company, while equity securities represent ownership in the company. Therefore, only equity securities represent an ownership interest. Choice A is incorrect because both debt and equity securities can be sources of financing for a corporation. Choice C is not necessarily true as some debt securities may come with voting rights, but this is not a characteristic that necessarily differs between debt and equity securities. Choice D is incorrect as the answer explanation shows that debt and equity securities differ in their representation of ownership interest.

In Which of the Following Ways Do Debt and Equity