Checkup 2 Flashcards
The Retained Earnings account on the Balance Sheet indicates how much cash a firm has. (T or F?)
False
The issuance of common stock is a source of short-term financing for a corporation. (T or F?)
False
The _______ acts on behalf of the bondholders.
trustee
Debt capital should never be used if the owners can avoid it. (T or F?)
False
_____________________ mature within one operating period.
Short-term liabilities
A primary reason for the formation of partnerships is the enlarged amount of ______________________.
capital resources
Short-term bank loans are usually interest-free. (T or F?)
False
A primary source of ownership capital is ________________________.
retention of earnings
The purchase of ________________________ automatically provides financing for a firm.
inventory on trade credit
The contract between the issuer and the holders of bonds is called a ___________.
debt indenture
A long-term debt instrument that is secured by specific property is called a _______________ bond.
mortgage
A government agency that provides financing to small businesses is the ___________________________.
Small Business Administration
In the majority of businesses, both ____________ and debt sources of financing are used.
equity
A convertible bondholder may exchange his creditor position for an ___________ position.
ownership
A bond is a long-term __________________________.
written promise to pay
