Alco Electronics Needs to Borrow Money to Pay for a Large

question 63

Multiple Choice

Alco Electronics needs to borrow money to pay for a large capital investment. It is deciding between getting a bank loan and issuing bonds. Which statement is TRUE about the options Alco is considering?

• A) A bank loan is part of a loanable funds market, but issuing bonds is not.
• B) A bank loan is borrowing from many savers, while issuing bonds is not.
• C) A bank loan is borrowing a large amount from one lender, while issuing bonds is borrowing small amounts from many lenders.
• D) Issuing bonds is part of the loanable funds market, but a bank loan is not.

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Definitions:

Account Affected

The specific ledger account impacted by a financial transaction, indicating where changes in value are recorded.

Debit and Credit

Accounting terms used to record transactions in the accounts, where debits increase asset or expense accounts and decrease liability, equity, or revenue accounts, and credits do the opposite.

Operations

The day-to-day activities involved in running a business that lead to the production of goods and delivery of services.

Journalizing

Journalizing is the process of recording transactions in a company's journal prior to posting them to the general ledger.