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ACC400 - Week 3 Solutions

ACC400 - Week 3 Solutions - 1 While this is generally true...

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1. While this is generally true, more precisely a current liability is a debt that can reasonably be expected to be paid: (a) from existing current assets or through the creation of other current liabilities and (2) within one year or the operating cycle, whichever is longer. 7. (a) Long-term liabilities are obligations that are expected to be paid after one year. Examples include bonds and long-term notes. (b) Bonds are a form of interest-bearing notes payable used by corporations, universities, and governmental agencies. 8. (a) Secured bonds have specific assets of the issuer pledged as collateral. In contrast, unsecured bonds are issued against the general credit of the borrower. (b) Convertible bonds permit bondholders to convert them into common stock at their option. In contrast, callable bonds are subject to call and retirement at a stated dollar amount prior to maturity at the option of the issuer. 19. No, Valentin is not correct. Liquidity involves measuring the short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
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