Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

Financial Accounting

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

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Multiple Choice

Which of the following entities receives cash when a company borrows money through a bond issue?

The Securities and Exchange Commission (SEC)

The underwriter

The issuing company

The bondholders

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Verified step by step guidance

Understand the concept of a bond issue: A bond is a debt instrument issued by a company to raise funds. When a company issues bonds, it is essentially borrowing money from investors (bondholders) who purchase the bonds.

Identify the role of the issuing company: The issuing company is the entity that needs funds and is responsible for creating and selling the bonds to investors. The cash received from the bondholders is used by the company for its operations, projects, or other financial needs.

Clarify the role of bondholders: Bondholders are the investors who purchase the bonds. They provide cash to the issuing company in exchange for the promise of periodic interest payments and the return of the principal amount at maturity.

Explain why the Securities and Exchange Commission (SEC) does not receive cash: The SEC is a regulatory body that oversees securities transactions, including bond issues, to ensure compliance with laws. It does not receive cash from the bond issuance process.

Discuss the role of the underwriter: The underwriter is typically a financial institution that helps the issuing company sell its bonds to investors. While the underwriter may receive fees for its services, it does not receive the cash raised from the bondholders; this cash goes directly to the issuing company.