Aardvark is considering issuing corporate bonds in order to raise mone

QUESTION

Aardvark is considering issuing corporate bonds in order to raise money. Which of the following, if true, strengthens the case for using corporate bonds?

A) The company’s customer base has been declining.
B) The company has debts that need to be paid immediately.
C) The company’s main interest is in long-term solvency.
D) The company is interested in cutting costs.
E) The company’s assets are rapidly depreciating.

ANSWER

Answer: B
Explanation: B) Selling bonds would result in an immediate inflow of cash that could be used to pay short-term debts. Choices A, D, and E do not relate to the choice of issuing corporate bonds. Choice C suggests that the company should pursue some financial option that will pay dividends over the long term.