A benefit of issuing corporate bonds instead of common stock is: Group of answer choices they do not need to be repaid interest must be paid periodically no cash will be raised there is no loss of ownership
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- Why might a company choose to raise money through bonds, rather than take out a note payable or issue stock? What are the advantages and disadvantages of bonds? What does it mean to issue a bond at a "premium" or at a "discount"?tRUE or FALSE One of several reasons that companies might choose to issue bonds is to shift their capital structure from more equity ownership to more borrowing?Identify the following as elther an advantage or a disadvantage of bond financing for a company. a. Bonds increase return on equity if the company earns a higher return with borrowed funds than it pays in interest. b. Interest on bonds is tax deductible. c. Bonds require payment of par value at maturity. d. Bonds do not affect owner control. e. A company earns a lower return with borrowed funds than it pays in interest. f. Unlike equity ownership, a par value payment is required at a specified date. Advantage
- Which is not true of preference shares? * A. Payment of dividends is mandatory if cumulative. B. Preference shares are convertible to ordinary shares or bonds. C. It is similar to debt financing in terms of limited cost payment. D. Cost is higher than cost of bonds.Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. a. Requires payments of both periodic interest and par value at maturity. b. Bonds require payment of par value at maturity. C. Bonds do not affect owner control. d. A company earns a lower return with borrowed funds than it pays in interest. e. A company earns a higher return with borrowed funds than it pays in interest. f. Bonds require payment of periodic interest.Which ot the following features would decrease the value of a corporate bond? A.The bond is sinior debt obligation B.The bond is convertible into shares C.The bond is secured by a mortgage on real estate D.The borrower has the option to repay the loan before maturity
- Which of the following is a disadvantage of using bonds? a. Bondholders do not participate in extraordinary profits; the payments are limited to interest. b. Bondholders do not have voting rights. c. Debt (other than income bonds) produces fixed charges, increasing the firm’s financial leverage. d. Flotation costs of bonds are generally lower than those of ordinary (common) equity shares.Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. a. Large payments of par value are made at maturity. b. Unlike equity, bonds do not affect ownership of a company. C. A business earns a lower return with the funds from the bond than it pays in interest. d. A business earns a higher return with the funds from the bond than it pays in interest. e. Requires payments of interest even when cash flows are low. f. Bond interest payments reduce total taxes paid.Which statement is FALSE regarding bonds?Select one:The pay back their face value within their maturity.They can be traded on secondary markets. Entitles its holder for cash inflows.When issued they increase the equity of the firm.
- * Your answer is incorrect. A company may repurchase its own shares for all of the following reasons, except O to reduce the number of shares issued and thereby increase earnings per share and return on equity. to have additional shares available for use in the acquisition of other companies. O to attempt to influence the market price of the shares. O to reduce the number of shares issued in order to meet debt to equity bank covenant requirements.How are warrants used by corporations? O To decrease the volatility of their common stock O To allow for issuance of debt at rates lower than would otherwise be required To decrease the dilution of earnings per share O More than one of the aboveIf bonds payable are not callable, the issuing corporation a.can exchange them for common stock b.can repurchase them in the open market c.is more likely to repurchase them if the interest rates increase d.must get special permission from the SEC to repurchase them