Liabilities - Long-term

8 important questions on Liabilities - Long-term

What is a common outcome for many long-term liabilities?

Refinancing

If a long-term liability is due to mature in the current period, how is it classified?

It is short term if the intention is to pay it off.
It is still long-term if the intention is to refinance.

Outside of stocks, what method of fund raising is used for very substantial financial needs?

Bonds
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What feature makes bonds very attractive?

Transferability (as compared to a regular loan)

What is it called when a bond can be paid off early at the discretion of the issuer?

A callable bond

What is a tax advantage of bonds vs. stock?

Dividends are not tax deductible, but bond interest is (it comes off of net income; dividends do not)

Four principal entries for bonds:

Issuing
Regular interest payments
Interest accrual
Retirement

What happens when a bond is sold between interest payments?

The investor pays the interest accrued up to the date the bond is sold.

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