Question

How does equity compare with debt regarding repayment of capital?

Options

• Equity has the same repayment obligations as debentures

• Equity principal is repaid at the agreed time

• Equity has no similar fixed repayment commitment

• Equity must be repaid when profits are inadequate

Answer 1

Debt principal must be repaid at the agreed time. Equity does not carry a similar fixed repayment commitment.