If a ﬁrm experiences a ﬁnancial loss for the year, the loss is shared equally by the debt holders and
equity holders.

Name: If a ﬁrm experiences a ﬁnancial loss for the year, the loss is shared equally by the debt holders and equity holders.
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Question

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The distribution of losses between debt holders and equity holders depends on the terms of the contracts and agreements between the firm and its creditors and investors. In some cases, losses may be absorbed entirely by either party.

If a ﬁRm Experiences a ﬁNancial Loss for the Year