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Explain the categories of long-term bonds.

      

Explain the categories of long-term bonds.

  

Answers


Kavungya
General obligation bond (GO) indicates that the security standing behind the bond is the total
credibility and unrestricted resource of the government unit or other not-for-profit agency. The bond is
said to be issued with the full faith and credit of source of funds. In a governmental unit, the general tax revenue provides the ultimate source of funds.

Revenue bonds are obligations issued to finance a revenue-generating project or enterprise. Both the
principal and interest of revenue bonds are required to be paid exclusively from the generated earnings.
The massive growth in revenue bonds has come about as a way of reducing dependence on general
obligation bonds. It has had the effect of shifting the burden away from taxpayers to users, avoiding
referendums and imposed debt ceilings. Typical uses of the revenue bond include financing of sewer and
water systems, airports, toll roads, hospitals, parking facilities, and industrial developments.

Industrial bonds are issued by governments to construct facilities for a private corporation that makes
lease payments to the government to service those bonds. Such bonds may be general obligation bonds,
combination bonds, or revenue bonds. The state legislature enacts enabling legislation to permit local
governments, typically municipalities, to finance the acquisition or construction of industrial facilities. The major purpose of these bonds is to encourage local economic development efforts. Originally industrial bonds were used almost entirely to attract, expand, or retain industrial facilities in a community. The uses of industrial bonds have expanded in recent years to include financing of span facilities/stadiums,
hospitals, transportation, pollution control, and industrial parks.
Kavungya answered the question on April 14, 2021 at 18:47


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