Which of the Following Best Describes the Position of the Bondholders

question 13

Multiple Choice

Which of the following best describes the position of the bondholders of an incorporated firm?

• A)They are owners of the corporation.
• B)They are creditors of the firm and thus expect to be paid interest on their investment according to their bond indenture (contract).
• C)They have the same rights and privileges of preferred shareholders of the firm.
• D)They are equity owners of the firm but they receive interest payments, not dividends.

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Definitions:

Cash Account

A financial account that tracks the flow of cash transactions, including receipts and payments, within a company.

Sales Discounts

Reductions in the sale price offered by a seller as an incentive for prompt payment by the buyer.

Cash Collection

The process of gathering and processing payments received from customers or clients.

Credit Terms

The conditions under which credit will be extended to a borrower, including repayment schedule, interest rate, and the lifespan of the loan.