Which of the following statement is TRUE regarding debt?

Related Mcqs:

1. Which of the following statement is CORRECT regarding compound interest?

   A. It is the most basic form of calculating interest.
   B. It earns profit not only on principal but also on interest.
   C. It is calculated by multiplying principal by rate multiplied by time.
   D. It does not take into account the accumulated interest for calculation.

2. Which of the following terms refers to the use of debt financing?

   A. Operating Leverage
   B. Financial Leverage
   C. Manufacturing Leverage
   D. None of the given options

3. Which of the following statement about bond ratings is TRUE?

   A. Bond ratings are typically paid for by a company’s bondholders.
   B. Bond ratings are based solely on information acquired from sources other than the bond issuer.
   C. Bond ratings represent an independent assessment of the credit-worthiness of bonds.
   D. None of the given options

4. _______________refers to the extent to which fixed-income securities (debt and preferred stock) are used in a firm’s capital structure?

   A. Financial risk
   B. Portfolio risk
   C. Operating risk
   D. Market risk

5. An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax__________?

   A. Term structure
   B. Market premium
   C. Risk premium
   D. Cost of debt

6. Rate of required return by debt holders is used for estimation the__________?

   A. Cost of debt
   B. Cost of equity
   C. Cost of internal capital
   D. Cost of reserve assets

7. A stock which is hybrid and works as a cross between debt and common stock is considered as_______________?

   A. Hybrid stock
   B. Common liabilities
   C. Debt liabilities
   D. Preferred stock

8. In situation of bankruptcy, stock which is recorded above common stock and below debt account is_____________?

   A. Debt liabilities
   B. Preferred stock
   C. Hybrid stock
   D. Common liabilities

9. The value of option issued to call debt is subtracted from rate of return on callable bond to calculate the rate of return on ____________?

   A. contributed bonds
   B. non-callable bonds
   C. callable bonds
   D. discounted bonds

10. The longer debt instrument issued by government and corporations is considered as _________?

    A. contraction bonds
    B. expansion bonds
    C. dollar bonds
    D. bonds