Which of the following best describes the position of the bondholders of an incorporated firm?
A)They are owners of the corporation.
B)They are creditors of the firm and thus expect to be paid interest on their investment according to their bond indenture (contract).
C)They have the same rights and privileges of preferred shareholders of the firm.
D)They are equity owners of the firm but they receive interest payments, not dividends.

Question

Quizplus · Accepted Answer

Bondholders are creditors of the firm and have loaned money to the corporation, expecting to be paid back with interest according to their bond indenture (contract). They do not have ownership rights in the corporation like common or preferred shareholders, and they do not receive dividends.

Which of the Following Best Describes the Position of the Bondholders