Question 1

Decisions about an initial public offering are better described as being finance and accounting matters than as marketing matters.

Accepted Answer

Decisions about an initial public offering (IPO) primarily involve financial and accounting considerations, such as valuation, financial performance, and regulatory compliance, rather than marketing strategies.

Question 2

On a balance sheet, bonds are included in the current liabilities row.

Accepted Answer

Bonds are typically included in the long-term liabilities section of a balance sheet, as they are usually obligations that are due in more than one year.

Question 3

Smaller firms or firms with negative earnings will also likely have higher rates associated with their bonds, possibly resulting in issuing bonds (debt) to be a more expensive alternative than equity.

Accepted Answer

Smaller firms or those with negative earnings are perceived as higher risk, leading to higher interest rates on bonds, making debt more expensive compared to equity.

Question 4

What is the meaning of the term "going public"? Explain the important issues involved in deciding whether to go public. Include cost estimates, advantages and disadvantages.

Accepted Answer

The answer of What is the meaning of the term...

Question 5

A popular way for a company to raise capital is to issue corporate bonds.

Accepted Answer

Issuing corporate bonds is a common method for companies to raise funds by borrowing from investors, who in return receive interest payments.

Question 6

Corporate bond prices are less sensitive to daily or quarterly firm operations compared to stock prices.

Accepted Answer

Corporate bond prices are generally less volatile than stock prices because they are primarily influenced by interest rates and credit risk, rather than daily or quarterly operational changes.

Question 7

The year 2016 was the sixth straight year that a record dollar value of bonds was sold in the United States.

Accepted Answer

The passage states that "The year 2016 was the sixth straight year that a record dollar value of bonds was sold in the United States." This means that the statement is true.

Question 8

Bonds are a good way to raise capital when a company's credit rating is not very good.

Accepted Answer

When a company's credit rating is not very good, issuing bonds can be expensive due to higher interest rates demanded by investors to compensate for the increased risk.

Quiz 8: Implementing Strategies: Finance and Accounting Issues