In: Finance
QUESTION : True or False
1- The prospectus for stock and a bonds covenant agreement are legal documents which describe certain parameters or obligations of the company to holders.
True
False
2- Retained earnings, or reserves, is a source of equity that is to be reported on the income statement.
True
False
3- An organization’s profitability measures may be affected by both operating and financing decisions
True
False
4- When an organization is unable to fulfill the obligations of its debt covenants under a bond indenture, the legal consequence could result in the organization’s assets being transferred to the bondholders. where the assets of the firm are transferred to the debt-holders.
True
False
5- A project’s cost of capital is what the organization should earn from the project and the project’s internal rate of return is what the organization can expect to earn from the project.
True
False
Answer 1
False The prospectus for stock and a bonds covenant agreement are legal documents which describe certain parameters or obligations of the company to holders.
Answer 2
False Retained earnings, or reserves, is a source of equity that is to be reported on the income statement.
Answer 3
True An organization’s profitability measures may be affected by both operating and financing decisions
Answer 4
True
When an organization is unable to fulfill the obligations of its debt covenants under a bond indenture, the legal consequence could result in the organization’s assets being transferred to the bondholders. where the assets of the firm are transferred to the debt-holders.
Answer 5
False A project’s cost of capital is what the organization should earn from the project and the project’s internal rate of return is what the organization can expect to earn from the project.
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