Seattle Music, Inc

question 229

Multiple Choice

Seattle Music, Inc., recently offered bonds for sale to the public. The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds. Seattle Music is obligated to:

• A) Represent each bondholder as an owner in the company.
• B) Pay interest semi-annually.
• C) Pay stockholders their dividends, before paying bondholders their interest.
• D) Pay each owner their principal if and when they want to cash in their investment.

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Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, showing the company's financial condition.

Current Ratio

Current ratio is a financial metric used to evaluate a company's ability to pay off its short-term liabilities with its short-term assets.

Quick Ratio

A measure of a company's ability to meet its short-term obligations using its most liquid assets, calculated as (Current Assets - Inventory) / Current Liabilities.

Credit Risk

The risk of loss due to a borrower's failure to make payments on any type of debt.