Question

Your large business just issued bonds for $10 million. You are excited about utilizing the new funds to expand. As you create your budgets for the upcoming years you need to keep in mind that your company will need to ________.

Answer 1

Answer:

pay annual interest and repay the whole $10 million at the maturity date.

Explanation:

You have to avoid the feeling of being able to spend freely, the same feeling you get when you start to use your first credit card. You feel great because you can buy all the things you want but eventually you have to pay the bill and it comes with interest.

This sense of fake ownership of the money is something very common specially in big corporations. Try to remember when GM, Chrysler and Ford were burning cash a decade ago while being bankrupt (or almost bankrupt in Ford's case). They overspent simply because there were still some people that were willing to lend them money until the bill came in and no money was left.