If a firm owns an asset, it might be able to deduct depreciation expenses. Takin

Question

If a firm owns an asset, it might be able to deduct depreciation expenses. Taking it a step further, If a firm leases an asset under an operating lease, what expenses, if any, can it deduct? A firm that leases an asset can still deduct depreciation expenses with regards to the asset. A firm that leases an asset can deduct the fair market value of the asset. A firm that leases an asset can deduct all costs associated with the asset except the lease payments. A firm that leases an asset can deduct the lease payments as ordinary and necessary business expenses. Question 11 How did mortgage-backed contribute to the subprime mortgage crisis that has been experienced recently? Question 12 What are the differences between common stock and preferred stock? In which situations do corporations use each kind of stock to raise funds?

Explanation / Answer

Subprime mortgage is a lending activity of whose credit history is poor or not sufficient to get a conventional mortgage. These mortgages offer interest-only loans. These are one of the causes of U.S. 2009 recession, because the homeowners whoever taken subprime mortgages will suffer the losses when the housing market declines and mostly they were default to pay the principle amounts. Therefore, this subprime mortgage crisis was caused to U.S. economy into the worst situation or recession.

Difference between Common stock and preferred stockholder’s:

Preferred stockholder’s having priority at the time of dividend payment and the dividend payment is also fixed for them, but in the case of common stock holder’s, they should be payable the dividend after the preferred holders. Therefore, preferred stockholders must be paid before common stockholders and always receive their dividends first. Even at the time of insolvency (or) the company is going to bankruptcy, preferred stockholder’s should be given first priority for the company’s asset and the common stockholder’s are in last line. Usually common stockholders having a voting right but in the case of preferred there is no voting right to them. Company’s which are having good financial health can issue common stock.

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