Multiple Choice
Which type of bonds have a claim on assets only after senior debt has been paid in full?
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9. Current Liabilities
Types of Liabilities
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Creditors' claims on a company's assets are called:
A
Equity
B
Assets
C
Revenue
D
Liabilities
Verified step by step guidance1
Understand the concept of creditors' claims: Creditors are entities or individuals to whom the company owes money. Their claims on the company's assets represent the obligations the company must fulfill.
Review the definition of liabilities: Liabilities are the financial obligations or debts of a company, which arise from past transactions or events and are settled over time through the transfer of money, goods, or services.
Differentiate between liabilities and other terms: Equity represents the owners' claims on the company's assets after liabilities are deducted. Assets are resources owned by the company, and revenue is the income generated from business operations.
Connect creditors' claims to liabilities: Since creditors are external parties to whom the company owes money, their claims are classified as liabilities on the company's balance sheet.
Conclude that liabilities are the correct term for creditors' claims on a company's assets, as they represent the company's obligations to repay debts or fulfill financial commitments.
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