Understanding Corporate Finance: Equity and Debt

What are the two primary ways a company can raise capital?

• Debt and Equity

• Loans and Mortgages

• Assets and Liabilities

• Stocks and Bonds

What does equity represent in a company?

• Future earnings potential

• Physical assets of the company

• Debt owed by the company

• Ownership in the company

What is the value of each share if a company with $10 million in assets owes $6 million in debts?

• $6.00

• $0.60

• $4.00

• $0.40

What is typically not a method to raise equity?

• Selling stock

• Issuing bonds

• Selling assets

• Preferred stock

What is the primary reason a company would issue stocks?

• To reduce its market value

• To decrease its assets

• To pay off its debts

• To expand ownership

What is a bond in financial terms?

• A debt security

• A type of bank loan

• A form of company ownership

• A type of stock

What is the face value of a bond?

• The original price paid for the bond

• The interest accrued over time

• The amount the bond will pay at maturity

• The amount it trades for on the market

What does a zero coupon bond imply about interest payments?

• Interest rates are variable

• Interest is paid annually

• No interest until maturity

• Interest is paid monthly

How is the interest on a bond typically paid through?

• Direct bank transfers

• Capital gains

• Coupon payments

• Stock dividends

What does the 'coupon' in bond terms refer to?

• The bond's trade frequency

• The total value of the bond

• A regular interest payment

• The bond's maturity date