If money raised in the issue of new stocks and bonds is used effectively,

Question

Quizplus · Accepted Answer

If money raised in the issue of new stocks and bonds is used effectively, it generates the means of repayment, meaning that the company will have the resources to pay back the borrowed funds or provide a return to the stockholders. This is the primary purpose of issuing new stocks and bonds. Choice A is not relevant, as double taxation refers to the taxation of income at both the corporate and individual levels, and is not affected by the use of funds raised from new stocks and bonds. Choice B is incorrect, as all firms must meet SEC requirements regardless of whether they issue new stocks and bonds. Choice C is incorrect, as "watered" stock refers to stock that has been issued with a higher face value than its actual value, and is not related to the effective use of funds raised from new stocks and bonds.

If Money Raised in the Issue of New Stocks and Bonds