cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond.

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Quizplus · Accepted Answer

This is because the cash flows associated with common stock are contingent on the company's performance and the dividends it chooses to pay out, while the cash flows associated with bonds are determined by a contractual agreement between the issuer and bondholders.

Cash Flows Associated with Common Stock Are More Difficult to Estimate