Acc501 Business Finance Chapter 19 Short Notes

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ACC501 Short Notes Lec 19

1.Bond price include

·         Annuity

·         Lumsum Amount

·         Both

·         Coupon Payment

2. Finding the value of Bond

·         C*[1-1/(1+r)t]/r+F/(1+r)t

·         C*[1/(1+r)t]/r+F/(1+r)t

·         C*[1+1/(1+r)t]/r+F/(1+r)t

·         C*[1-1/(1+r)]/r+F/(1+r)t

3. Securities issued by the corporations may be classified roughly a

·         Equity Securities

·         Debt Securities

·         Both a & b

·         Annuity

4. When corporations borrow, they generally promise to

·         Make regular scheduled interest payments

·         Repay the original amount borrowed (principal)

·         Equity Securities

·         A & b

5. When corporations borrow, they generally promise to

·         Make regular scheduled interest payments

·         Repay the original amount borrowed (principal)

·         Both a & b

·         Debt is not an ownership interest in the firm

6. The main differences between debt and equity are the following

·         Debt is not an ownership interest in the firm. Creditors generally do not have voting power.

·         Corporation’s payment of interest on debt is considered as a cost of doing business and is fully tax deductible. While dividends paid to stockholders are not tax-deductible.

·         Unpaid debt is a liability of the firm. If it is not paid, the creditors can legally claim the assets of the firm, resulting in bankruptcy or financial failure. This possibility does not arise when equity is issued.

·         All of Above

7. A number of features that distinguish the securities from one another

·         Maturity is the length of time debt remains outstanding with

some unpaid balance.

·         Short-term debt (having maturity of one year or less) is sometimes

 referred to as unfunded debt

·         Debt securities are typically called notes, debentures or bonds

·        
All Of Above