Which One of the Following Statements Concerning Debt Issues Is

question 17

Multiple Choice

Which one of the following statements concerning debt issues is correct?

• A)Firms often pay higher interest rates on term loans than on public issues of debt.
• B)The only difference between a term loan and a private placement is the size of the issue.
• C)A prospectus is required for equity issues but not for debt issues.
• D)The flotation costs of issuing debt tend to be more expensive than for issuing equity.
• E)Direct long-term loans must be registered with the SEC.

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Definitions:

Realized Gross Profit

The gross income that a company has earned and recognized from its sales or services, after accounting for the cost of goods sold, but before deducting operating expenses.

Installment Sales Revenue

Revenue recognized from sales that are paid in installments over a period, rather than in a single transaction.

Installment Sales Method

An accounting technique used to recognize revenue from sales made on credit, where income is recognized proportionally as payments are received.

Recognized Gross Profit

Gross profit that has been realized and reported in the financial statements of a company, calculated as sales revenue minus the cost of goods sold.