Which of the following statements are true about unsecured bonds? I. Income bonds require interest payments only if earned and non-payment of interest does not lead to bankruptcy. Usually issued during the reorganization of a firm facing financial difficulties. II. Debentures are unsecured long-term debt and backed only by the reputation and financial stability of the corporation. Because of this, the earning ability of the issuing corporation is of great concern to the bondholder. III. Claims of bondholders of subordinated debentures are honored only after the claims of secured debt and unsubordinated debentures have been satisfied. IV. Income bonds have longer maturity and unpaid interest is allowed to accumulate for some period of time and must be paid prior to the payment of any dividends to stockholders.
Which of the following statements are true about unsecured bonds?
I. Income bonds require interest payments only if earned and non-payment of interest does not lead to bankruptcy. Usually issued during the reorganization of a firm facing financial difficulties.
II. Debentures are unsecured long-term debt and backed only by the reputation and financial stability of the corporation. Because of this, the earning ability of the issuing corporation is of great concern to the bondholder.
III. Claims of bondholders of subordinated debentures are honored only after the claims of secured debt and unsubordinated debentures have been satisfied.
IV. Income bonds have longer maturity and unpaid interest is allowed to accumulate for some period of time and must be paid prior to the payment of any dividends to stockholders.
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