Multiple Choice
Which of the following statements typifies defined contribution plans?
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1. Introduction to Accounting
Types of Accounting
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Which of the following investments signifies ownership in a corporation?
A
Commercial paper
B
Common stock
C
Corporate bonds
D
Preferred stock
Verified step by step guidance1
Understand the concept of ownership in a corporation: Ownership signifies having equity in the company, which typically comes with rights such as voting on corporate matters and sharing in profits through dividends.
Differentiate between equity and debt investments: Equity investments represent ownership (e.g., common stock and preferred stock), while debt investments (e.g., corporate bonds and commercial paper) represent loans made to the corporation.
Analyze the options provided: Commercial paper and corporate bonds are debt instruments, meaning they do not signify ownership but rather a claim to repayment with interest. Common stock and preferred stock are equity instruments, signifying ownership in the corporation.
Focus on the key characteristics of common stock: Common stock represents the most direct form of ownership in a corporation, typically granting voting rights and a share in the company's profits through dividends.
Conclude that the correct answer is common stock, as it is the investment that signifies ownership in a corporation.
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