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28 Cards in this Set
- Front
- Back
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The effective interest rate times the amount of the debt outstanding during the interest period
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Periodic interest
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A form of debt consisting of separable units that obligates the issuing corporation to repay a stated amount at a specified maturity date and to pay interest to bondholders between the issue date and maturity.
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Bonds
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Document that describes specific promises made to bondholders.
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Bond indenture
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Secured only by the "full faith and credit" of the issuing corporation.
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Debenture bond
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The holder is not entitled to receive any liquidation payments until the claims of other specified debt issues are satisfied.
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Subordinated debenture
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Backed by a lien on specified real estate owned by the issuer.
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Mortgage bond
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Name of the owner was not registered; the holder actually clipped an attached coupon and redeemed it in accordance with instructions on the indenture.
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Coupon bonds
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allows the issuing company to buy back, or call, outstanding bonds from the bondholders before their scheduled maturity date.
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Callable
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bonds that must be redeemed on a prespecified year-by-year basis; administered by a trustee who repurchases bonds in the open market.
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Sinking fund debentures
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more structured (and less popular) way to retire bonds on a piecemeal basis.
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Serial bonds
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bonds for which bondholders have the option to convert the bonds into shares of stock.
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Convertible bonds
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arises when bonds are sold for more than face amount.
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Premium
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Arises when bonds are sold for less than face amount.
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Discount
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recording interest each period as the effective rate of interest multiplied by the outstanding balance of the debt.
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Effective interest method
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schedule that reflects the changes in the debt over its term to maturity.
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Amortization schedule
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recording interest each period at the same dollar amount.
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Straight-line method
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with either publicly or privately sold debt, the issuing company will incur costs in connection with issuing bonds or notes, such as legal and accounting fees and printing costs, in addition to registration and underwriting fees.
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Debt issue costs
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rate implicit in the agreement.
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Implicit rate of interest
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debt is retired prior to its scheduled maturity date.
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Early extinguishment of debt
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bonds for which bondholders have the option to convert the bonds into shares of stock.
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Convertible bonds
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the investor has the option to purchase a stated number of shares of common stock at a specified option price, within a given period of time
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Detachable stock purchase warrants
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interest that has accrued since the last interest date.
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Accrued interest
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the original terms of a debt agreement are changed as a result of financial difficulties experienced by the debtor (borrower).
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Troubled debt restructuring
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Bonds do not pay interest. Instead, they offer a return in the form of a "deep discount" from the face amount
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Zero-coupon bonds
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Net Income
------------------ Shareholder's Equity |
Rate of return on shareholder's equity
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Net Income + Interest + Taxes
--------------------------------------------- Interest |
Times interest earned ratio
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Total liabilities
--------------------- Shareholder's equity |
Debt to equity ratio
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Net income
----------------- Total assets |
Rate of return on assets
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