An Unsecured Note Differs from a Debenture in That It

question 53

Multiple Choice

An unsecured note differs from a debenture in that it has:

• A) as security only unpledged assets.
• B) as security a floating charge over assets.
• C) as security a fixed charge over assets.
• D) no supporting security.

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Definitions:

Tax Shield

The reduction in income taxes that result from taking a deductible expense, such as mortgage interest, which reduces taxable income.

Financial Distress Costs

Expenses that a company faces when it is having difficulty meeting its financial obligations, which can include legal, restructuring, and operational costs.

Debt-equity Ratio

The ratio highlighting the financial mix of equity and debt used in the acquisition of company assets.

Break-even Level

The juncture where overall expenses match the total income, leading to neither a net profit nor a loss.