Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q5DQ (page 471)

What are three forms of corporate securities discussed in the chapter?

Short Answer

Expert verified

Three forms of corporate securities are corporate bonds, common, and preferred stock.

Step by step solution

01

Corporate securities 

Corporate securities are commercial legal papers that facilitate a corporation to gather funds from investors and lenders for smooth functioning of its business operations.

02

Forms of corporate securities

Corporate securities are classified into three categories:

  • Corporate bonds: Corporate bonds are debts that a company issues to raise capital from lenders.
  • Common stock: Common stock represents equity rights of investors in the company’s assets and associated obligations.
  • Preferred stock: Preferred stocks are stocks that enjoy the benefits of some preferential rights than common stockholders.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: Barton Simpson, the chief financial officer of Broadband Inc. could hardly believe the change in interest rates that had taken place over the last few months. The interest rate on A2 rated bonds was now 6 percent. The $30 million, 15-year bond issue that his firm has outstanding was initially issued at 9 percent five years ago. Because interest rates had gone down so much, he was considering refunding the bond issue. The old issue had a call premium of 8 percent. The underwriting cost on the old issue had been 3 percent of par, and on the new issue it would be 5 percent of par. The tax rate would be 30 percent and a 4 percent discount rate would be applied for the refunding decision. The new bond would have a 10-year life. Before Barton used the 8 percent call provision to reacquire the old bonds, he wanted to make sure he could not buy them back cheaper in the open market.

d. In terms of the refunding decision, how should Barton be influenced if he thinks interest rates might go down even more?

What is the purpose of serial repayments and sinking funds? (LO16-1)

Using the information in Problem 3, assume that American Health Systems’ 1,700,000 additional share can only be issued at $18 per share.

a. Assume that American Health Systems can earn 6 percent on the proceeds. Calculate earnings per share.

b. Should the new issue be undertaken based on earnings per share?

What method of “bond repayment” reduces debt and increases the amount of common stock outstanding? (LO16-3)

What is the difference between a bond agreement and a bond indenture? (LO16-1)
See all solutions

Recommended explanations on Business Studies Textbooks

Financial Performance

Read Explanation

Nature of Business

Read Explanation

Strategic Analysis

Read Explanation

Strategic Direction

Read Explanation

Influences On Business

Read Explanation

Organizational Behavior

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free