Term
Long-Term Liability
4 Types |
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Definition
An obligation that will not be satisfied within one year or the current operating cycle
1) Bonds 2) Notes 3) Leases 4) Deferred Taxes |
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Term
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Definition
| Principal amount of the bond as stated on the bond certificate |
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Term
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Definition
| a security or financial instrument that allows firms to borrow money and repay the loan over a long period of time (term) |
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Term
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Definition
| bonds that are not backed by specific collateral |
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Term
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Definition
| do not all have the same due date; a portion of the bonds comes due each time period |
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Term
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Definition
| Bonds backed by specific assets |
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Term
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Definition
| Bonds that can be converted into common stock at a future time |
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Term
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Definition
| bonds that may be retired before their specified due date |
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Term
| Face Rate of Interest (stated, nominal, contract, coupon) |
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Definition
| the amount of interest that will be paid each interest period |
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Term
| Market rate of interest (effective, bond) |
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Definition
| The rate that investors could obtain by investing in other bonds that are similar to the issuing firm's bonds |
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Definition
| the present value of the annuity of interest payments plus the present value of the principal |
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Definition
| excess of the issue price over the face value of the bonds |
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Definition
| The excess of the face value of bonds over the issue price |
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Term
| Market rate >=< Face Rate |
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Definition
Market Rate=Face Rate-- issued at face value amount
Market Rate > Face Rate-- issued at a discount
Market Rate< Face Rate-- issued at a premium |
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Term
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Definition
| process of transferring an amount from the discount or premium account to interest expense each time period to adjust interest expense |
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Term
| Effective interest method of amortization SETUP |
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Definition
Cash Interest (Column 1) = Bond Face Value X Face Rate
Interest Expense (Column 2) = Carrying Value X Market Rate
Discount Amortized (Column 3)= Interest Exp - Cash Int
Carrying Value (C4) = Face Value- Unamortized Discount |
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Term
| Gain or loss on redemption of a bond |
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Definition
Gain = Carrying Value - Redemption Price
Loss = Redemption Price - Carrying Value |
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Term
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Definition
| does not meet any of the four criteria and is not recorded as an asset by the lessee. (rent expense) (disclosed in notes) |
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Definition
| Recorded as an asset. Depreciates over time |
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Term
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Definition
- transfers ownership of property
- contains a bargain-purchase option
-term is 75% of property's life
- present value of payments is >90% of property's fair market value |
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Term
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Definition
how much creditors contributed compared to owners
Total Liabilities/Stockholders' Equity |
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Term
| Times Interest Earned Ratio |
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Definition
ability to pay the interest of their debt
Income Before Interest and Tax/Interest Expense |
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Term
| Debt Service Coverage Ratio |
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Definition
ability to repay principal on loans
cash flow from operations bfor int. and tax/ interest and principal payment |
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