Question

why is the distinction between equity and liability important to investors and creditors?​

Answer 1

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The more debt relative to equity that an entity has, the higher the risk to lenders that the borrowing entity may default on its loan obligations. The distinction between liabilities and equity therefore impacts upon compliance with such loan contracts.

Answer 2

Answer:

The distinction between liabilities and equity therefore impacts upon compliance with such loan contracts.

Explanation:

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