Industrial Development Bonds Are Issued in the Name of a Government

question 4

Multiple Choice

Industrial development bonds are issued in the name of a government with the proceeds used to attract private businesses to a community. Which of the following is a true statement about industrial development bonds?

• A) The proceeds are used by the private corporations and principal and interest payments are made by the private corporation. The government backs the bonds in the event of default by the private corporation.
• B) The proceeds are used by the private corporations and principal and interest payments are made by the private corporation. The government does not back the bonds in the event of default by the private corporation.
• C) The proceeds are used by the government to build infrastructure to service private corporations, with principal and interest payments made by the government out of the additional tax revenues received from the private corporation.
• D) The proceeds are used by the government to build infrastructure to service private corporations, with principal and interest payments made by the private corporation in lieu of property taxes.

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Definitions:

ROE

Return on Equity, a financial ratio indicating the profitability of a corporation in relation to stockholders’ equity, showing how well the company uses investments to generate earnings growth.

EPS

Earnings Per Share, a company's profit divided by the number of outstanding shares of its common stock, indicating the company's profitability.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profit that includes all incomes and expenses except interest and income tax expenses.

ROCE

Return on Capital Employed; a measure of a company's profitability in relation to its capital, indicating how efficiently capital is being utilized to generate profits.