Discussion Questions For Week 2 ACC400

Discussion Questions For Week 2 ACC400 Does Not Have To Be In Paragra
Discussion questions for week 2 ACC400. Does not have to be in paragraph format, does not need references. Please answer each question separately with a response of about Words.
Paper For Above instruction
DQ1: What is a current liability? What is a noncurrent liability? What is the difference between the two types of liabilities? In which financial statement would you find these liabilities?
A current liability is a financial obligation that a company is required to settle within one year or within the normal operating cycle, whichever is longer. Examples include accounts payable, wages payable, taxes payable, and short-term loans. These liabilities are expected to be paid using current assets, such as cash or equivalents.
A noncurrent liability, also known as a long-term liability, is a debt or obligation that is not due for settlement within the normal operating cycle or one year. Examples include long-term loans, bonds payable, lease obligations, and pension liabilities. These are typically paid over an extended period and are classified separately on the balance sheet.
The primary difference between current and noncurrent liabilities lies in their time horizon for settlement. The current liabilities impact the company's short-term liquidity, while noncurrent liabilities represent longer-term financial commitments.
Both types of liabilities are reported on the balance sheet under liabilities, with current liabilities listed first due to their short-term nature, followed by noncurrent liabilities. The statement of financial position (balance sheet) provides a snapshot of these liabilities at a specific point in time.
DQ2: What are the types of equity accounts? What is the role of equity accounts in raising capital? Under what circumstances would you not pay a dividend? Under what circumstances would you pay a dividend?
Equity accounts typically include common stock, preferred stock, retained earnings, additional paid-in capital, treasury stock, and accumulated other comprehensive income. These accounts reflect the owners’ claims on the company’s assets after liabilities are deducted.
The role of equity accounts in raising capital is fundamental, as issuing stock (common or preferred) allows companies to generate funds for growth, expansion, or debt repayment without increasing liabilities. Equity financing provides capital while sharing ownership and control among shareholders.
Dividends may not be paid when the company is experiencing losses, has insufficient retained earnings, or is reinvesting profits into business growth and expansion. Also, some firms choose to retain earnings instead of paying dividends to strengthen their financial position or fund future projects.
Dividends are typically paid when the company is profitable, has ample retained earnings, and aims to attract and retain investors seeking income. Additionally, mature companies with stable cash flows are more likely to pay regular dividends to reward shareholders and signal financial health.
DQ3: What is the difference between a bond that sells at a premium and a bond that sells at a discount? How is this related to the market rate?
A bond that sells at a premium is sold for more than its face (par) value, whereas a bond sold at a discount is sold for less than its face value. The key factor influencing this is the relationship between the bond's coupon rate and the prevailing market interest rate.
If the bond's coupon rate (the interest rate paid to bondholders) is higher than the current market rate, investors will be willing to pay more than the face value, causing the bond to sell at a premium. Conversely, if the coupon rate is lower than the market rate, the bond will sell at a discount, reflecting a lower price to compensate for the lower interest payments compared to what new bonds are offering.
This relationship ensures that the bond's yield to maturity aligns with current market conditions. Bond prices fluctuate inversely with market interest rates, adjusting to offer equivalent return rates to investors, which explains premiums and discounts.
DQ4: What are three different types of a stock in a company? Which type would you prefer to own? Why?
The three common types of stocks are common stock, preferred stock, and treasury stock. Common stock provides ownership rights, voting privileges, and residual claims on earnings and assets. Preferred stock offers dividends with priority over common stock but usually without voting rights. Treasury stock consists of shares that a company has repurchased from the market and holds in its treasury.
Personally, I would prefer to own common stock because it offers voting rights and participation in the company’s growth and profit sharing through dividends. Despite being riskier than preferred stock, common stock typically provides greater potential for capital appreciation, aligning with an investor seeking growth and influence in company decisions.
However, preferred stock might appeal to investors seeking steady dividend income with less risk, and treasury stock is generally for corporate use rather than individual investment choices.
References

• Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice. Cengage Learning.
• Higgins, R. C. (2018). Analysis for Financial Management. McGraw-Hill Education.
• Ross, S. A., Westerfield, R. W., & Jaffe, J. (2021). Corporate Finance. McGraw-Hill Education.
• Fabozzi, F. J. (2017). Bond Markets, Analysis and Strategies. Pearson.
• Graham, B., & Dodd, D. L. (2008). Security Analysis: Sixth Edition. McGraw-Hill.
• Seitz, S. (2020). Equity Capital Markets: An Introduction. Wiley Finance.
• Bernstein, P. L. (2013). Capital Ideas Evolving. Wiley.
• Woolridge, J. R. (2020). Financial Statement Analysis. Cengage Learning.
• Ross, S. A. (2022). Fundamentals of Corporate Finance. McGraw-Hill Education.
• Reilly, F. K., & Brown, K. C. (2017). Investment Analysis and Portfolio Management. Cengage Learning.