What Do Bonds Represent

question 6

Multiple Choice

What do bonds represent?

• A)shares of ownership in a corporation and a guaranteed stream of profits
• B)shares of ownership in a corporation and an entitlement to its future profits
• C)debt contracts with corporations or governments and regular interest payments on the loan
• D)debt contracts with corporations or governments and some unspecified interest payments on the loan

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Definitions:

Margin of Safety

The difference between actual sales and the break-even point, indicating the risk level of not covering fixed costs.

Break-even Sales

The amount of revenue required to cover all fixed and variable costs, resulting in neither profit nor loss.

Sales Percentage

A metric that shows what portion of a company's total sales is made up of a particular product or service.

Degree of Operating Leverage

A metric that measures a company's sensitivity of operating income to its sales, indicating the impact of fixed and variable costs.