Positive covenants specify actions a borrowing company must take as part of the indenture. These covenants eliminate the possibility that managers of financially distressed firms will pass on positive NPV projects.   Question  options:   a) True   b) False

Q: 1b) Banks offer overdraft facilities and term loans, among other services, to their corporate…

A: The answer is stated below:

Q: Give an Answer with an explanation and explain below Option a: This option is correct or incorrect…

A: Financial intermediaries bring two parties i.e., investor and borrower together through their…

Q: Short-term debt should be excluded in the estimation of WACC if it is a permanent source of…

A: B.'False' is an incorrect answer as WACC full form is the weighted average cost of capital and if it…

Q: Unsecured creditors: have rights to be paid amounts owed, but the rights may have to be enforced…

A: Correct option is 1. i.e unsecured creditors have rights to be paid amounts owed, but the rights may…

Q: Many types of debt including auto loans, student loans and credit debt are securitized. The…

A: Securitization is the procedure where an issuer designs a marketable financial instruments by…

Q: When a small firm works with an investment banker to raise funds through the sale of bonds on a…

A: Bonds:Bonds are debt instrument also known as a fixed income security that is created for raising…

Q: What is the most obvious difference between debt and equity financing? a. Principal and interest…

A: Debt financing includes bonds and debts which are financial instruments and use to raise finance for…

Q: Bonds can be an effective counterbalance in a portfolio heavily invested in stocks. True False

A: Bonds: It is a type of investment wherein the issuer of the bond promises the holder of the bond to…

Q: Direct financing allows a borrower to:

A: Direct financing is a financing approaches in which the borrower (or financer) directly purchases…

Q: Do you think companies have more incentive to report securitization as a sale or secured borrowing…

A: Window Dressing: It refers to the more formal steps that have been done to enhance the financial…

Q: One way that debt holders can add some "protection" to their claim on the firm's assets is to add…

A: Debt covenants, whether affirmative or negative, act as a protective layer for debt holders. They…

Q: Think from the borrower (management) and NOT lender (investor) points of view. Which is the less…

A: Analysis of the given options from the borrower points of view:   a) Bond financing- Bond financing…

Q: Reinvestment risk occurs when a financial institution holds longer-term assets relative to…

A: Reinvesting means putting the profit back into the same scheme.

Q: What are the two best arguments favor debt reduction (i.e., the pros)?

A: Debt financing indicates the mode of raising funds from the outside in return for timely loan…

Q: Easter Corporation will replace one of its assets with an updated model. The current asset was…

A: Initial investment = Cost of new asset - Sales proceed net of tax of old asset Sales proceed net of…

Q: Which of the following is incorrect about debt financing? A. Debt financing always generates excess…

A: Debt financing is a common method for companies to raise capital by borrowing funds. While it offers…

Q: What primary factor should a creditor consider when evaluating whether a corporation can pay the…

A: The primary factor a creditor should consider while evaluating whether a corporation can pay…

Q: A fair value hedge differs from a cash flow hedge because a fair value hedge Select one: a.records…

A: The three types of the hedge are as follows: Cash flow hedge Fair value hedge Net investment hedge

Q: How are derivatives valued on the balance sheet? How is the adjustment to fair value recorded…

A: Derivatives: This is the financial instrument used  for managing risk and safeguard the risk created…