Question

Charlie Chicken Restaurants announced it plans to issue $300 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means

a) the corporation will borrow $300 million worth of long-term financing. The bond issue will not carry any collateral
b) the corporation will lssue $300 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds
c) the corporation will borrow $300 million worth of long-term financing. The issue will be becked by the property and buildings purchased with the funds bonds.
d) financiers will be paid from the revenues created by the individusi franchises
the corporation will issue $300 million worth of interest-free

Answer 1

A) the corporation will borrow $300 million worth of long-term financing. The bond issue will not carry any collateral

Step-by-step explanation:

In this case, a debenture bond is debt issued by Charlie Chicken Restaurants that doesn't have any type of collateral. It is not backed up by any asset or property. Debenture bonds are recorded as liabilities in the balance sheet. They are similar to personal loans for individuals, since they are a way of raising money based on the "credit rating" of the corporation.