Multiple Choice
Which of the following statements does NOT describe an advantage inherent in equity financing?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is a contractual party who agrees to perform an obligation for the other party?
A
Investor
B
Obligor
C
Guarantor
D
Creditor
Verified step by step guidance1
Understand the key terms in the question: 'Obligor,' 'Guarantor,' 'Creditor,' and 'Investor.' Each term has a specific meaning in financial accounting and contractual agreements.
Define 'Obligor': An obligor is a party who has agreed to perform an obligation under a contract. This obligation could involve repaying a debt, delivering goods, or providing services.
Define 'Guarantor': A guarantor is a party who agrees to fulfill the obligation of the obligor if the obligor fails to do so. The guarantor provides a guarantee for the performance of the obligation.
Define 'Creditor': A creditor is a party to whom money is owed. They are the recipient of the obligation performed by the obligor, typically in the form of repayment of a loan or debt.
Define 'Investor': An investor is a party who allocates capital with the expectation of receiving financial returns. They are not directly involved in performing obligations under a contract in the context of this question.
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