14-which of the following statements about the characteristics of debt and equity are true? Please select one; a) they both can be long term financial instruments b) they both involve a claim on the issuers income c) they both enable a corporation to raise fund d) all of the above e) only a and b of the above

14-which of the following statements about the characteristics of debt and equity are true? Please select one; a) they both can be long term financial instruments b) they both involve a claim on the issuers income c) they both enable a corporation to raise fund d) all of the above e) only a and b of the above

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 5QE: Assume that a corporation needs to enter the private debt market to raise funds for plant expansion....

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6. Which of the following is true of secondary securities? a) They include equities, bonds, and other debt claimsb) They are backed by the real assets of corporations issuing them c) They are securities that back primary securitiesd) They are securities issued by FIs
9. The choice of the proper mixture of debt and equity, used to finance a corporation, is also referred to as the A. capital budgeting decision.B. capital structure decision.C. investment decision.D. liquidity decision. 10. As a legal entity, a corporation can perform the following functions EXCEPT: A. voteB. borrow money, lend money, sue and be sued, and vote.C. borrow money and lend money.D. borrow money, lend money, and sue and be sued. 12. A firm's investment decision is also called its A. liquidity decision.B. financing decision.C. leasing decision.D. capital budgeting decision. 13. A corporation, potentially, has infinite life because it A. has the same ownership and management.B. is a legal entity.C. is closely regulated.D. has limited liability.
17. Which of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? Group of answer choices In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. All of these. This classification is not allowed for investment in debt instruments.
14 Which of the following statements best describes how a corporation determines its cost of capital? Group of answer choices The cost is a function of the issuance of interest-bearing instruments. The cost is derived from determining the cost of each component in a firm's capital structure. The cost is a function of temporary (short-term) sources of financing. The cost is derived only from permanent investments by shareholders.
Assume that a corporation needs to enter the private debt market to raise funds for plant expansion. The corporation expects debt covenants to place restrictions on the levels of its current ratio and total-liabilities-to-assets ratio. Considering the accounts that comprise these ratios, give examples of accounting estimates, accounting judgments, and structured transactions that the lender should examine closely.
2. Each of the three categories of investments in debt and equity securities have similar accounting for all of the following transactions, except for a. initial recording of costb. recognition of dividend and interest incomec. recognition of realized gains or losses on salesd. recognition of unrealized holding gains and losses
(a) From what sources might a corporation obtain fundsthrough long-term debt? (b) What is a bond indenture?What does it contain? (c) What is a mortgage?
Which of the following is not a capital market instrument? a. Corporate stock b. Mortgages c. Corporate bonds d. Repurchase agreement
Which of the following is not a liability? a) Amounts owed to shareholders as capital b) Government grants repayable c)Rebates payable d) Debentures
Assuming that the company’s business model has an objective of holding debt securities to collect contractual cash flows and hold investment available for sale when opportunity arises, what is the realized gain on sale of the Yankee bonds in 2021?
16- Which of the following statements is/are correct? i. The sale of stocks is also referred to as equity finance ii. The sale of bonds is also referred to as debt finance a. Both i and ii are correct b. Only i c. Only ii d. Both i and ii are incorrect
1. Under Application Guidance 36 of IAS 32, an entity’s own equity instruments also known as treasury shares shall be presented as Group of answer choices a. Financial asset b. Financial liability c. Deduction in the shareholder’s equity at par value or stated value d. Deduction in the shareholder’s equity at cost