The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. How does providing a sinking fund for principal repayment make the bonds more attractive? Explain in detail.

The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. How does providing a sinking fund for principal repayment make the bonds more attractive? Explain in detail.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 16MCQ

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The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. Please explain all the methods in great detail,
The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. Explain all the methods in great detail.
The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow Flyover to borrow.
The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. What does providing a restrictive indenture limiting the risk in future undertakings do? How does it make the bonds more attractive? Explain in great detail.
The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. Please provide a detail explanation for each Explain how to secure the bonds with owned assets in great detail. In what ways does it make the bonds more attractive to allow the company to borrow? What is the agreement to subordinate future debt? How does it make the bonds more attractive?
A company with a poor credit rating needs to raise funds for expansion, but the bank will not give them a loan. In addition, their common stock prices are already low, so they do not want to issue more shares of common stock. What would be the best way for this company to raise funds for the expansion? Sell secured bonds. Sell callable bonds. Sell convertible bonds. Sell unsecured bonds.
Which of the following statements is CORRECT? a. Sinking fund provisions never require companies to retire their debt; they only establish "targets" for the company to reduce its debt over time. b. Most sinking funds require the issuer to provide funds to a trustee, who holds the money so that it will be available to pay off bondholders when the bonds mature. c. Sinking fund provisions sometimes turn out to adversely affect bondholders, and this is most likely to occur if interest rates decline after the bond was issued. d. If interest rates increase after a company has issued bonds with a sinking fund, the company will be less likely to buy bonds on the open market to meet its sinking fund obligation and more likely to call them in at the sinking fund call price. e. A sinking fund provision makes a bond more risky to investors at the time of issuance.
In certain scenerios, some companies may choose to finance with a bank loan specifically because of the deductibility of interest. It could lower their taxable income enough (assuming it is not a corporation at the current 21% flat rate) to put them in a lower tax bracket. This means they could end up paying less money after interest and taxes are paid. It is interesting that bank interest could be utilized as a cash flow strategy! Do you think this is something many finance managers may consider?
When a small firm works with an investment banker to raise funds through the sale of bonds on a best-efforts basis, which of the following functions does not come into play? Underwriting Indenture Origination Distribution
Which of the following would increase a bank’s Net Interest Margin, assuming all else stays the same? Choose Two an increase in the interest rate on its loans companies paying off some of their loans and the bank using the funds to purchase Treasury bonds customers switching a portion of their time deposits to demand deposits the bank issues additional equity and keeps the funds in cash an increase in the federal funds rate assuming the bank borrows more in the federal funds market than it lends
What are some of the ways that banks can borrow short-term funds when they need "liquidity"?(Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window".
Decide whether the following statement makes sense (or is clearly true) or does not make sense (or is clearly false). Explain. I'm already retired, so I need low-risk investments. That's why I put most of my money in U.S. Treasury bills, notes, and bonds.Choose the correct answer below. A.This makes sense because the safest investments are federally insured bank accounts and U.S. Treasury bills; there's virtually no risk of losing the principal invested. B.This does not make sense because U.S. Treasury bills, notes, and bonds are high-risk investments that offer prospects of higher returns, along with the possibility of losing the principal. C.This does not make sense because U.S Treasury bills are different than notes and bonds. The U.S Treasury bills are low-risk while the notes and bonds are high-risk. D.This makes sense because low-risk is a smart choice for a retired person with limited monthly income.