Chapter 9
Identify two ratios commonly used to assess a company's financial risk.
*Times interest earned ratio *Debt to equity ratio
Identify the characteristics of an annuity.
A series of amounts that are equal, Equal time periods between payment dates
Werner issues bonds at a discount. The related Discount account should be classified as a(n)
Contra Liability
Financing with ______ requires borrowing, whereas financing with ________requires issuing shares of stock.
Debit, Equity
is a contractual arrangement in which an owner provides a user the right to use an asset for a specified period of time.
Lease
Dorothea Inc. is selling all of its bonds to a large pension fund. This an example of a(n) ____Placement
Private
The debt to equity ratio is calculated as
Total Liabilities divided by Total Stockholders' Equity
Periodic payments on installment notes typically include (Select all that apply.)
a portion that reflects interest., a portion that reduces the outstanding loan balance
A series of equal amounts paid or received over equal time periods is called a(n)
annuity
The two types of financing are
debit, equity
A common reason for redeeming a bond prior to its maturity date is that
market interest rates decreased
When a corporation repurchases its bonds from the bondholders, the corporation___ the bond
retired
Corporate bonds most often pay interest
semiannually
The rate of interest printed on the face of a bond is referred to as the _____________ interest rate
stated
Callable bonds can be redeemed at the choice of
the bond issuer.
Convertible bonds allow the lender to convert each bond into:
common stock
The Discount on Bonds Payable account is classified as a(n)
contra-liability.
Which of the following are common characteristics or provisions of bonds?
convertible, secured/unsecured, callable,
Quattro Lending Company is considering lending a large sum to Eleance Inc. During its decision process, Quattro should especially consider Eleance's existing:
long-term liabilities
A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is called a(n)
Lease
bonds are supported by a specific asset the issuer pledges as collateral.
Secured Bond
If ABC Company receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value, the transaction will be recorded with a
debit to Cash of $100,000 and a credit to Bonds payable of $100,000.
Neumann Corporation is planning to issues bonds with a face amount of $2 million. If Neumann's accountant, Betty, wants to calculate the expected issue she should calculate the ____ of the related future cash payments using the ____ interest rate.
Present value, market
Bonds that require payment of the full principle amount of the bond at the end of the loan term are referred to as
Term bonds
bonds are retired when the bondholder exchanges them for the issuing company's stock.
convertible