ACC 557 TUTOR Learn by Doing/acc557tutor.com ACC 557 TUTOR Learn by Doing/acc557tutor.com | Page 59

From the standpoint of the issuing company, a disadvantage of using
bonds as a means of long-term financing is that
interest must be paid on a periodic basis regardless of earnings.
the bondholders do not have voting rights.
income to stockholders may increase as a result of trading on the
equity.
bond interest is deductible for tax purposes.
11-Multiple Choice Question 194
The times interest earned ratio is computed by dividing
income before interest expense by interest expense.
net income by interest expense.
income before income taxes and interest expense by interest expense.
income before income taxes by interest expense.
12- Multiple Choice Question 152
If the market interest rate is greater than the contractual interest rate,
bonds will sell
at a discount.
only after the stated interest rate is increased.
at face value.
at a premium.
13- Multiple Choice Question 158
The market interest rate is often called the