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 is NOT an advantage of issuing bonds instead of common stock?

Issuing bonds does not dilute ownership of existing shareholders

Interest expense on bonds is tax-deductible

Bonds must be repaid at maturity, increasing future cash obligations

Bonds can allow a company to raise large amounts of capital

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Verified step by step guidance

Step 1: Understand the context of the question. The problem is asking to identify which option is NOT an advantage of issuing bonds compared to issuing common stock. This requires analyzing the characteristics of bonds and their implications for a company.

Step 2: Review the advantages of issuing bonds. Bonds do not dilute ownership of existing shareholders because bondholders are creditors, not owners. Additionally, interest expense on bonds is tax-deductible, which can reduce the company's taxable income.

Step 3: Evaluate the disadvantages of issuing bonds. Bonds must be repaid at maturity, which creates a future cash obligation for the company. This repayment requirement is a financial burden and is considered a disadvantage rather than an advantage.

Step 4: Compare the options provided in the question. Identify which statement does not align with the advantages of issuing bonds. The statement 'Bonds must be repaid at maturity, increasing future cash obligations' is a disadvantage, not an advantage.

Step 5: Conclude that the correct answer is the statement that highlights a disadvantage of bonds, as it does not fit the criteria of being an advantage.