Bond Certificate
a legal document that indicates the name of the issuer, the face value of the bonds, and such other data as the contractual interest rate and the maturity date of the bonds
Bonds
a form of interest-bearing notes payable issued by corporations, universities, and government entities
callable bonds
bonds that are the issuing company can retire at a stated dollar amount prior to maturity
Capital lease
A contractual agreement allowing one party ( the lessee) to use the assets of another party (the lessor); accounted for like a debt-financed purchase by the lessee.
Contingencies
Events with uncertain outcomes that may represent potential liabilities.
Contractual (stated) Interest rate
rate used to determine the amount of interest the borrower pays and the investor receives.
Convertible Bond
Bond that can be converted into common stock at the bondholders option.
Current Liability
a debt that a company reasonably expects to pay (1) from existing current assets or through the creation of other current liabilities, and (2) Within one year or the operating cycle, whichever is longer.
Discount (on a bond)
the difference between the face value of a bond and its selling price, when a bond is sold for less then face value
Effective-interest method of amortization
a method of amortizing bond discount or bond premium that results in periodic interest expense equal to a constant percentage of the carrying value of bonds.
Effective-interest rate
Rate established when bonds are issued that remains constant in each interest period
Face value
amount of principal due at the maturity date of the bond
Long-term liability
Obligations that a company expects to pay more then one year in the future.
Market Interest rate
the rate investors demand for loaning funds to the corporation
Maturity date
the date on which the final payment on a bond is due from the bond issuer to the investor
Mortgage note payable
a long term note secured by a mortgage that pledges title to specific assets as security for the loan.
Notes Payable
an obligation in the form of a written note
Off-balance sheet financing
the international effort by a company to structure its financing arrangements so as to avoid showing liabilities on its balance sheet
Operating lease
a contractual agreement allowing one party (the lessee) to use the asset of another party (the lessor); accounted for as a rental
Premium (on a bond)
The difference between the selling price and the face value of a bond when a bond is sold for more than its face value.
Present Value
the value today of an amount to be received at some date in the future after taking into account current interest rates.
Secured Bonds
Bonds that have specific assets of the issuer pledged as collateral
Straight-line method of amortization
a method of amortizing bond discount or bond premium that allocates the same amount to interest expense in each interest period
Time value of money
the relationship between time and money. A dollar received today is worth more than a dollar promised at sometime in the future.
Times interest ratio
A measure of a company's solvency, calculated by dividing income before interest expense and taxes by interest expense.
Unsecured Bonds
Bonds issued under the general credit of the borrower
Land
Cost of land itself plus clearing, draining, filling, grading, and razing old buildings and removal costs. Land is not subject to depreciation.
Land Improvements
Structural additions made to land, e.g. driveways, parking lots, fences, landscaping and underground sprinklers.
Buildings
Cost includes purchase price, closing costs, real estate broker's commission and repairs to get building ready for use
1. When building is constructed, cost includes contract price plus architect's fees, building permits, and excavation costs
2. Interest
Buildings
Furniture, machinery, trucks etc. Cost includes sales tax, freight and insurance during transit paid by purchaser
Return on Assets Ratio
Net Income Divided by Average Assets
Asset Turnover Ratio
Net Sales Divided by Average Total Assets
Intangible Assets
Patents, R & D Costs, Copyrights, Trade Marks, Franchises, Licenses, Goodwill
Note Payable
If due within one year, usually classified as a current liability.
Sales tax payable
The company acts as a collection agent for the taxing authority
Unearned Revenue
Advance payments for goods or services to be provided
Current Maturities of Long-term debt
Long-term debt due within one year