Florida General Contractor Practice Exam

An unsecured long-term note-payable is also known as what?

1. Bond

2. Debenture

3. Mortgage

4. Lease obligation

The correct answer is: Debenture

An unsecured long-term note payable is referred to as a debenture. This type of financial instrument represents a loan made to a company or government and is backed only by the creditworthiness and reputation of the issuer, rather than any specific asset. Debentures typically have a fixed interest rate and a principal amount due at maturity, making them important tools for organizations to secure funding without pledging collateral. In contrast, a bond often involves some form of security, where specific assets may be collateralized to back its value. Mortgages specifically relate to loans for purchasing real property and are secured by the property itself. A lease obligation refers to the financial commitment associated with leasing property or equipment and is tied to rental agreements rather than debt instruments. This distinction underscores the importance of understanding debentures in the context of unsecured long-term financing options.