Multiple Choice
Debt financing refers to funds that:
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9. Current Liabilities
Types of Liabilities
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Creditors' claims on assets are called:
A
Revenues
B
Assets
C
Liabilities
D
Owner's equity
Verified step by step guidance1
Understand the concept of creditors' claims on assets: Creditors are entities or individuals to whom a company owes money. Their claims on the company's assets are referred to as liabilities.
Review the definitions of the options provided: Revenues are earnings from business operations, assets are resources owned by the company, liabilities are obligations owed to creditors, and owner's equity represents the owner's residual interest in the company after liabilities are deducted.
Identify the correct term that matches the definition of creditors' claims on assets. Since liabilities represent amounts owed to creditors, this is the correct answer.
Clarify why the other options are incorrect: Revenues are not claims on assets but income generated, assets are owned resources rather than claims, and owner's equity is the owner's stake in the company, not creditors' claims.
Conclude that liabilities are the correct term for creditors' claims on assets, as they represent the obligations owed to creditors by the company.
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