#1
Which of the following is considered a current liability?
Accounts receivable
Bonds payable
Notes payable due in three years
Accrued expenses
#2
What is the main purpose of issuing bonds?
To obtain equity financing
To obtain long-term debt financing
To increase current liabilities
To decrease shareholder equity
#3
Which of the following is an example of a contingent liability?
Accounts payable
Income tax payable
Warranty claims against the company
Notes payable
#4
What is the formula to calculate the current ratio?
Current assets divided by current liabilities
Total assets divided by total liabilities
Current assets divided by long-term liabilities
Total liabilities divided by total assets
#5
What does the term 'working capital' represent?
The difference between current assets and long-term liabilities
The ability of a company to meet its short-term obligations
The total assets of a company minus its total liabilities
The portion of current assets financed by long-term debt
#6
What is the purpose of a bond's maturity date?
To determine when interest payments are made to bondholders
To indicate when the bond's principal amount is repaid
To specify when the bond can be called by the issuer
To establish the interest rate on the bond
#7
Which of the following represents a current liability?
Mortgage payable in 10 years
Unearned revenue
Long-term notes payable
Common stock
#8
Which of the following represents a type of bond that does not pay periodic interest?
Zero-coupon bond
Convertible bond
Callable bond
Municipal bond
#9
How are bond prices affected by changes in interest rates?
Bond prices increase as interest rates increase
Bond prices decrease as interest rates increase
Bond prices remain unaffected by changes in interest rates
Bond prices decrease as interest rates decrease
#10
What is the purpose of a sinking fund in relation to bonds?
To repay bondholders at maturity
To fund the redemption of bonds before maturity
To pay periodic interest payments to bondholders
To finance the issuance of new bonds
#11
What does the term 'callable bond' mean?
A bond that can be converted into shares of stock
A bond that can be redeemed by the issuer before maturity
A bond that pays no interest until maturity
A bond that is secured by specific assets of the issuer
#12
What is the primary disadvantage of issuing bonds compared to equity financing?
Bonds require periodic interest payments
Bondholders have voting rights
Bonds decrease financial leverage
Bonds are less flexible than equity
#13
What is the relationship between bond prices and bond yields?
They move in the same direction
They move in opposite directions
They remain constant
They are unrelated
#14
What is the purpose of a bond's call provision?
To specify when the bond's principal amount is repaid
To allow the issuer to redeem the bonds before maturity
To determine when interest payments are made to bondholders
To establish the interest rate on the bond
#15
What is a bond indenture?
The official document that outlines the terms and conditions of a bond issue
The financial institution that manages bond issuances
The process of converting bonds into shares of stock
The market where bonds are bought and sold
#16
What is the difference between a debenture and a bond?
There is no difference; they are synonymous terms
A debenture is secured by specific assets, while a bond is not
A debenture is always issued by governments, while a bond is issued by corporations
A debenture is a type of bond that is always convertible into shares of stock
#17
What is the purpose of a bond's coupon rate?
To determine the bond's market price
To calculate the bond's yield to maturity
To indicate the periodic interest payments to bondholders
To determine the bond's face value
#18
What does the term 'debenture holder' refer to?
An individual who holds shares of stock
An investor who holds preferred stock
A bondholder who is not secured by collateral
A creditor who holds short-term debt
#19
What is the main difference between a secured bond and an unsecured bond?
The interest rate offered
The credit rating of the issuer
Whether the bond is backed by specific assets
The maturity date of the bond