The Major Disadvantages of Issuing a Bond Are the Risk

question 84

True/False

The major disadvantages of issuing a bond are the risk of bankruptcy and the negative impact on cash flow because debt must be repaid at a specified date in the future.

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Definitions:

Operating Cash Flow

The revenue generated by a company through its primary business functions.

Interest Expense

This is the cost incurred by an entity for borrowed funds, which can include the cost of bonds, loans, and lines of credit.

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the loss in value over time.

Net Working Capital

The measure of a business's available short-term resources versus its short-term financial commitments, indicating its near-term financial strength.