Asked by Emily Treadaway on Jun 17, 2024
Verified
Companies with a history of net operating losses are prone to issue which one of the following to raise money?
A) Debenture bonds
B) Serial bonds
C) Preferred stock
D) Notes payable
Net Operating Losses
A situation where a company's operating expenses exceed its revenues, which can have tax implications and affect future earnings reports.
Debenture Bonds
Unsecured bonds that rely on the creditworthiness and reputation of the issuer for support, without specific collateral.
- Uncover the traits of convertible securities and their handling in financial accounts.
Verified Answer
SR
stephany ramirezJun 21, 2024
Final Answer :
C
Explanation :
Companies with a history of net operating losses may have difficulty issuing debt because they may not have a steady income or collateral to secure the loan, so it is unlikely they will issue debenture or serial bonds. Issuing notes payable may also be difficult as they may not have a good credit rating. As such, issuing preferred stocks may be the best option as preferred stocks do not require collateral and do not have a maturity date, making it easier for the company to manage their cash flow.
Learning Objectives
- Uncover the traits of convertible securities and their handling in financial accounts.
Related questions
By Using the Book Value Method to Record the Conversion ...
According to Current GAAP,convertible Bonds Must Be Recorded at the ...
The If-Converted Method for Computing Earnings Per Share Dilution Understates ...
Refer to Scenario: Canada Corp ...
Bonds Payable with a Conversion Privilege Are Accounted for as ...