The entity theory of equity implies that there should be no need for financial statements to distinguish

Question:

The entity theory of equity implies that there should be no need for to distinguish between debt and equity. Alternatively, proprietary theory implies that such a distinction is necessary and yields information vital to owners and potential stockholders.

Required:
a. Discuss the entity theory rationale for making no distinction between debt and equity.
b. Is entity theory or proprietary theory consistent with modern theories of finance— that is, does the firm’s make a difference? Explain. Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...