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

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following statements is an advantage of bond financing?

Bonds do not require repayment of principal at maturity.

Interest expense on bonds is tax-deductible for the issuing corporation.

Bondholders have voting rights in the corporation.

Issuing bonds decreases the company's financial leverage.

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Verified step by step guidance

Understand the concept of bond financing: Bond financing involves a company borrowing money from investors by issuing bonds. The company agrees to pay periodic interest and repay the principal amount at maturity.

Analyze the first statement: 'Bonds do not require repayment of principal at maturity.' This is incorrect because bonds typically require repayment of the principal amount at maturity.

Evaluate the second statement: 'Interest expense on bonds is tax-deductible for the issuing corporation.' This is correct because interest payments on bonds are considered an expense and can reduce taxable income, providing a tax advantage to the corporation.

Review the third statement: 'Bondholders have voting rights in the corporation.' This is incorrect because bondholders are creditors, not owners, and do not have voting rights in corporate decisions.

Assess the fourth statement: 'Issuing bonds decreases the company's financial leverage.' This is incorrect because issuing bonds increases financial leverage by adding debt to the company's capital structure.