CONNECT Ch. 9 – Flashcards

Which of the following is not a primary source of corporate debt financing? Bonds Payable. Common Stock. Leases. Notes Payable.

The mixture of liabilities and stockholders' equity a business uses is called its: Bond contract. Carrying value. Capital structure. Accounting equation.

Term bonds are: Bonds issued below the face amount. Bonds that mature in installments. Bonds that mature all at once. Bonds issued above the face amount.

Serial bonds are: Bonds backed by collateral. Bonds that mature in installments. Bonds with greater risk. Bonds issued below the face amount.

Which of the following is not true regarding callable bonds? This feature allows the borrower to repay the bonds before their scheduled maturity date. This feature helps protect the borrower against future decreases in interest rates. Callable bonds benefit the bond investor. A bond can be both callable and convertible.

Convertible bonds: Provide potential benefits only to the issuer. Provide potential benefits only to the investor. Provide potential benefits to both the issuer and the investor. Provide no potential benefits.

The price of a bond is equal to: The future value of the face amount only. The present value of the interest only. The present value of the face amount plus the present value of the stated interest payments. The future value of the face amount plus the future value of the stated interest payments.

Ordinarily, the proceeds from the sale of a bond issue will be equal to: The face amount of the bond. The total of the face amount plus all interest payments. The present value of the face amount plus the present value of the stream of interest payments. The face amount of the bond plus the present value of the stream of interest payments.

For a bond issue that sells for more than the bond face amount, the stated interest rate is: The actual yield rate. The prime rate. More than the market rate. Less than the market rate.

For a bond issue that sells for less than the bond face amount, the stated interest rate is: The actual yield rate. The prime rate. More than the market rate. Less than the market rate.

The rate quoted in the bond contract used to calculate the cash payments for interest is called the: Face rate. Yield rate. Market rate. Stated rate.

The true interest rate used by investors to value a bond is called the: Face interest rate. Cash payment rate. Market interest rate. Stated interest rate.

The rate quoted on the bond contract used to calculate the cash payments for interest is called the: Face interest rate. Interest expense rate. Market interest rate. Stated interest rate.

Bonds payable should be reported as a long-term liability in the balance sheet at: Face Value. Current bond market price. Carrying value. Face value less accrued interest since the last interest payment date.

A bond issued at a discount indicates that at the date of issue: Its stated rate was lower than the prevailing market rate of interest on similar bonds. Its stated rate was higher than the prevailing market rate of interest on similar bonds. The bonds were issued at a price greater than their face value. The bonds must be non-interest bearing.

A bond issued at a premium indicates that at the date of issue: Its stated rate was lower than the prevailing market rate of interest on similar bonds. Its stated rate was higher than the prevailing market rate of interest on similar bonds. The bonds were issued at a price greater than their face value. The bonds must be non-interest bearing.

An amortization schedule for a bond issued at a discount: Has a carrying value that decreases over time. Is contained in the balance sheet. Is a schedule that reflects the changes in bonds payable over its term to maturity. All of these.

An amortization schedule for a bond issued at a premium: Has a carrying value that increases over time. Is contained in the balance sheet. Is a schedule that reflects the changes in bonds payable over its term to maturity. All of these.

In each succeeding payment on an installment note: The amount that goes to decreasing the carrying value of the note increases. The amount that goes to decreasing the carrying value of the note decreases. The amount that goes to decreasing the carrying value of the note is unchanged. The amounts paid for both interest and principal increase proportionately.

In each succeeding payment on an installment note: The amount of interest expense increases. The amount of interest expense decreases. The amount of interest expense is unchanged. The amounts paid for both interest and principal increase proportionately.

Which of the following is not a true statement? The debt to equity ratio measures a company's risk and is calculated as total liabilities divided by stockholders' equity. Leverage enables a company to earn a higher return using debt than without debt. Return on assets is calculated as net income divided by the ending balance for total assets. The times interest earned ratio compares interest expense with income available to pay interest charges.

The advantages of obtaining long-term funds by issuing bonds, rather than issuing additional common stock, include which of the following? (A) Interest payments are tax deductible to the company, while dividends are not. (B) The risk of going bankrupt decreases. (C) Expansion is achieved without surrendering ownership control. (D) Both A and C