#1
Which of the following is considered a current liability?
Accrued expenses
ExplanationObligations incurred but not yet paid.
#2
What is the main purpose of issuing bonds?
To obtain long-term debt financing
ExplanationTo raise capital by borrowing money from investors.
#3
Which of the following is an example of a contingent liability?
Warranty claims against the company
ExplanationPotential liabilities that may arise depending on the outcome of future events.
#4
What is the formula to calculate the current ratio?
Current assets divided by current liabilities
ExplanationMeasure of a company's ability to pay short-term obligations.
#5
What does the term 'working capital' represent?
The ability of a company to meet its short-term obligations
ExplanationCurrent assets minus current liabilities.
#6
What is the purpose of a bond's maturity date?
To indicate when the bond's principal amount is repaid
ExplanationDate when bond's face value is repaid.
#7
Which of the following represents a current liability?
Unearned revenue
ExplanationReceived payment for goods/services not yet provided.
#8
Which of the following represents a type of bond that does not pay periodic interest?
Zero-coupon bond
ExplanationA bond that is sold at a discount and repaid at face value at maturity without periodic interest payments.
#9
How are bond prices affected by changes in interest rates?
Bond prices decrease as interest rates increase
ExplanationInverse relationship; as interest rates rise, bond prices fall.
#10
What is the purpose of a sinking fund in relation to bonds?
To fund the redemption of bonds before maturity
ExplanationReserves set aside to retire debt.
#11
What does the term 'callable bond' mean?
A bond that can be redeemed by the issuer before maturity
ExplanationIssuer's right to repay the bond before maturity.
#12
What is the primary disadvantage of issuing bonds compared to equity financing?
Bonds require periodic interest payments
ExplanationInterest expense.
#13
What is the relationship between bond prices and bond yields?
They move in opposite directions
ExplanationInverse relationship.
#14
What is the purpose of a bond's call provision?
To allow the issuer to redeem the bonds before maturity
ExplanationIssuer's right to retire bond early.
#15
What is a bond indenture?
The official document that outlines the terms and conditions of a bond issue
ExplanationLegal agreement between issuer and bondholders detailing terms of the bond.
#16
What is the difference between a debenture and a bond?
A debenture is secured by specific assets, while a bond is not
ExplanationSecurity interest in collateral.
#17
What is the purpose of a bond's coupon rate?
To indicate the periodic interest payments to bondholders
ExplanationInterest rate stated on the bond.
#18
What does the term 'debenture holder' refer to?
A bondholder who is not secured by collateral
ExplanationBondholder with no specific collateral.
#19
What is the main difference between a secured bond and an unsecured bond?
Whether the bond is backed by specific assets
ExplanationPresence of collateral.