Asked by Denice Isidro on Jul 29, 2024
Verified
Equity capital is considered less risky because dividend payments are always at the company's discretion and are not legally enforceable until declared.
Equity Capital
The amount of money that is invested into a business by its owners in exchange for a share of ownership.
Dividend Payments
Distribution of a portion of a company's earnings to its shareholders, usually in cash or additional stock.
- Identify the principal financial ratios employed to evaluate liquidity, profitability, and leverage.
Verified Answer
TC
Thomas Carson LeaphartJul 30, 2024
Final Answer :
True
Explanation :
Equity investors are not entitled to receive dividend payments and companies have no legal obligation to make them. Therefore, equity capital is considered less risky because there is no contractual obligation to pay dividends or return the initial investment, unlike with debt capital.
Learning Objectives
- Identify the principal financial ratios employed to evaluate liquidity, profitability, and leverage.
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