Corporations Try to Create Hybrid Securities That Look Like Equity

question 29

Multiple Choice

Corporations try to create hybrid securities that look like equity but are called debt because:

• A)debt interest expense is tax deductible.
• B)bankruptcy costs are eliminated or reduced.
• C)these securities are lower is risk than debt.
• D)Both A and C.
• E)Both A and B.

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Definitions:

NSF Check

A cheque that cannot be processed because the writer's account lacks sufficient funds, standing for "Non-Sufficient Funds."

Debit Memorandum

A document or entry that records an adjustment or reduction in expenses payable to a vendor or an increase in inventory cost.

Adjusting Entries

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditure to the correct periods.

NSF Check

A check that cannot be processed because the account on which it is drawn does not have sufficient funds.