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ACC 221: CHAPTER 10
long-term liabilities
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debts or other obligations that will not be paid within one year
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present value of $1
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the value today of $1 to be received or paid at some future date, given a specified interest rate
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compounding period
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the period of time for which interest is computed
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annuity |
a series of equal amounts to be received or paid at the end of equal time intervals
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present value of an annuity
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the value today of a series of equally spaced, equal-amount payments to be made or received in the future given a specified interest rate
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mortgage payable
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a written promise to pay a stated amount of money at one or more specified future dates; certain assets, usualy real estate, are pledged as collateral
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mortgage amortization schedule
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a schedule that shows the breakdown between interest and principal of each payment over the life of a mortgage
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bond |
a contract in which a borrower promises to pay a specified rate of interest to a lender for each period the bond is outstanding and pay the principal at that maturity date
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debenture (unsecured bonds)
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bonds for which no collateral has been pledged
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secured bonds
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bonds for which assets have been pledged in order to guarantee repayment
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registered bonds
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bonds for which the names and addresses of the bondholders are kept on file by the issuing company
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coupon bonds
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unregistered bonds for which owners receive periodic interest payments by clipping a coupon from the bond and sending it to the issuer as evidence of ownership
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term bonds
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bonds that mature in one single sum at a specified future date
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serial bonds
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bonds that mature in a series of installments at specified future dates
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callable bonds
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bonds for which the issuer reserves the right to pay the obligation before its maturity date
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convertible bonds
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bonds that can be traded for, or converted to, other securities after a specified period of time
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zero-coupon (deep discount) bonds
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bonds issued with no promise of interest payments; only a single payment will be made
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junk bonds
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bonds issued by companies in weak financial condition with large amounts of debt already outstanding; these bonds yield high rates of return because of high risk
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bond indenture
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a contract between a bond issuer and a bond purchaser that specifies the terms of a bond
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principal
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(face value; maturity value) the amount that will be paid on a bond at the maturity date
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bond maturity date
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the date at which a bond principal or face amount becomes payable
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market rate (effective rate; yield rate) of interest
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the actual interest rate earned or paid on a bond investment
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stated rate of interest
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the rate of interest printed on the bond
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bond discount
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the difference between the face value and the sales prices when bonds are sold below their face value
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bond premium
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the difference between the face value and the sales price when bonds are sold above their face value
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debt ratio
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a measure of leverage, computed by dividing total liabilities by total assets
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debt-to-equity ratio
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the number of dollars of borrowed funds for every dollar invested by owners; computed as total liabilities divided by total stockholders' equity
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times interest earned
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a measure of borrower's ability to make required interest payments; computed as income before interest and taxes divided by annual interest expense
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straight-line amortization
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a method of systematically writing off a bond discount or premium in equal amounts each period until maturity
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effective-interest amortization
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a method of systematically writing off a bond premium or discount that incorporates the time value of money and results in an equal interest rate for each period
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bond carrying value
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the face value of bonds minus the unamortized discount or plus the unamortized premium
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