Which of the following is true?
A)It is common for companies to both retire debt and issue new bonds in the same year as a way to replace higher interest rate debt with lower rate issuances.
B)Payment of interest is an investing activity since we would not have interest unless we borrowed money or sold bonds to the public.
C)Retractable bonds require cash outflow connected to investing when the issuing corporation redeems the bonds.
D)The corporation will have to pay cash to bond investors when those investors demand to call the bonds.

Question

Quizplus · Accepted Answer

It is common for companies to retire high interest rate debt by issuing new bonds at a lower rate in the same year.

Answer: B
 Payment of interest is a financing activity, not an investing activity, since it is directly related to borrowing money or issuing bonds.

Answer: C
 Retractable bonds require a cash outflow connected to financing when the issuing corporation redeems the bonds.

Answer: D
 Bond investors cannot demand to call bonds, but the corporation may have to pay cash to bond investors if the corporation decides to call the bonds.

Which of the Following Is True