Debt capital may be short- or long-term. Companies that provide motherboards to Dell are a source of
Question:
Debt capital may be short- or long-term. Companies that provide motherboards to Dell are a source of short-term debt capital. They expect to be paid fairly quickly, but not at the moment of delivery. They provide Dell a very short-term form of debt capital. The long-term debt of a closely held corporation is likely to come from a commercial lender that takes a security interest in specified corporate property. This is much like an individual who obtains a mortgage from a bank secured by the home purchased with the borrowed funds. Large corporations have another alternative for obtaining long-term debt capital. Just as a publicly held corporation may sell its stock to the public, it also may sell the public units of debt, called bonds. A pension plan that holds Dell’s 30-year bonds is providing long-term debt capital to the company. Debt capital specifies an interest rate (or a formula for computing the rate) to be paid on the principal borrowed. Principal and interest are required to be paid in set amounts, usually over a defined term.
Questions
1. Do corporations have constitutional rights? Explain.
2. Why is the business judgment rule needed?
3. What characteristics of the corporate form make it particularly desirable for a business entity? Particularly undesirable?
4. Do S corporations share those characteristics?
5. a. What property rights are associated with common stock?
b. Does preferred stock carry the same rights?
Step by Step Answer:
Law Business And Society
ISBN: 9781260247794
13th Edition
Authors: Tony McAdams, Kiren Dosanjh Zucker, Kristofer Neslund, Kari Smoker