When a Company Is Obligated Contractually to Pay Interest on Debt

question 19

True/False

When a company is obligated contractually to pay interest on debt, it must pay the interest even if it shows no profit for the year, or else it may go bankrupt.

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Definitions:

Obligor's Performance

The execution of duties or fulfillment of obligations by the party (obligor) that is bound by a contractual agreement to provide a service, payment, or benefit to another party.

Life Insurance

A contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured.

Proceeds

The amount of money or assets received from a transaction, sale, or event.

Beneficiary

An individual or entity entitled to benefits or proceeds from an insurance policy, trust, will, or other contracts.