Quiz 14: Long-Term Liabiities:bonds Andnotes

Business

In our opinion, GE Capital act unethical by selling $11 billion of long term debt without telling those investors that a few days later it would be filing documents to prepare for another $50 billion debt offering. The investor has invested in $11 billion of long term debt, after checking the financial statements, and calculating the Debt-equity ratio and Times of interest earned ratio. The amount of Equity and net income will not change, but with the issue of another $50 billion debt, these ratios will change. And this will be a great shock for the investors. Too much debt can be a financial burden that may even lead to bankruptcy. Hence, the situation is revealing GE capital's unethical behavior towards investors.

When issuing a bond a company has two obligations that are incurred from its issuance. (a) Interest payments- usually paid semi-annually (b) Principal payment- paid at maturity

Effect of financing on EPS: Earnings per share (EPS): Earnings per share measures the income earned by each share of common stock. EPS can be calculated by using the formula below: img img

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