Floating-Rate Debt Is Advantageous to Investors Because the Interest Rate

question 15

True/False

Floating-rate debt is advantageous to investors because the interest rate moves up if market rates rise.Since floating-rate debt shifts interest rate risk to companies, it offers no advantages to issuers.

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Definitions:

Allowance Account

A contra-asset account used to estimate and offset losses from potentially uncollectible accounts receivable.

Debit Balance

An accounting entry that represents a situation where debits exceed credits in an account, indicative of assets or expenses.

Adjusting Entry

A journal entry made in accounting records to update the balances of accounts at the end of an accounting period, ensuring that revenues and expenses are matched accurately.

Aging

A method used to categorize and manage accounts receivable based on the length of time they have been outstanding.