Provides a summary of the cash interest payments, interest expense, and changes in carrying value for debt instruments.
Bond p. 413
A formal debt instrument that obligates the borrower to repay a stated amount, referred to as the principal or face amount, at a specified maturity date.
Bond indenture p. 414
A contract between a firm issuing bonds and the corporations or individuals who purchase the bonds.
Callable p. 415
A bond feature that allows the borrower to repay the bonds before their scheduled maturity date at a specified call price.
Capital lease p. 434
Contract in which the lessee essentially buys an asset and borrows the money through a lease to pay for the asset.
Capital structure p. 412
The mixture of liabilities and stockholders' equity in a business.
Carrying value p. 425
The balance in the bonds payable account, which equals the face value of bonds payable minus the discount or the face value plus the premium.
Convertible p. 415
A bond feature that allows the lender (or investor) to convert each bond into a specified number of shares of common stock.
Debt financing p. 412
Obtaining additional funding from lenders.
Debt to equity ratio p. 435
Total liabilities divided by total stockholders' equity; measures a company's risk.
Default risk p. 418
The risk that a company will be unable to pay the bond's face amount or interest payments as it becomes due.
Discount p. 418
A bond's issue price is below the face amount.
Early extinguishment of debt p. 430
The issuer retires debt before its scheduled maturity date.
Equity financing p. 412
Obtaining additional funding from stockholders.
Installment payment p. 432
Includes both an amount that represents interest and an amount that represents a reduction of the outstanding balance.
Lease p. 433
A contractual arrangement by which the lessor (owner) provides the lessee (user) the right to use an asset for a specified period of time.
Market interest rate . p. 416
Represents the true interest rate used by investors to value a bond
Operating lease p. 433
Contract in which the lessor owns the asset and the lessee simply uses the asset temporarily.
Premium x p. 420
Premium A bond's issue price is above the face amount. p. 420
Private placement. p. 413
Sale of debt securities directly to a single investor
Return on assets p. 437
Net income divided by average total assets; measures the income generated per dollar of assets.
Return on equity . p. 437
Net income divided by average stockholders' equity; measures the income generated per dollar of equity
Secured bonds Bonds p. 414
that are supported by specific assets pledged as collateral.
Serial bonds Bonds p. 414
that require payment of the principal amount of the bond over a series of maturity dates.
Sinking fund . p. 414
An investment fund used to set aside money to be used to pay debts as they come due
Stated interest rate p. 416
The rate quoted in the bond contract used to calculate the cash payments for interest.
Term bonds p. 414
Bonds that require payment of the full principal amount of the bond at a single maturity date.
Times interest earned ratio . p. 438
Ratio that compares interest expense with income available to pay those charges
Unsecured bonds p. 414
Bonds that are not supported by specific assets pledged as collateral.