accrued expense
an expense incurred but not yet paid in cash
accrued liability
a liability for an expense that has not yet been paid
bonds payable
groups of notes payable issued to multiple lenders called bondholders
callable bond
bonds that are paid off early at a specified price at the option of the issuer
capital lease
lease agreement in which the lessee assumes, in substance, the risks and rewards of asset ownership.
convertible bonds (or notes)
bonds or notes that may be converted into the issuing company's common stock at the investor's option
current portion of long term debt
the amount of the principal that is payable within one year
debentures
unsecured bonds-- bonds backed only by the good faith of the borrower.
discount (on a bond)
excess of a bond's face (par) value over its issue price
earnings per share (EPS)
amount of a company's net income per share of its outstanding common stock.
lease
rental agreement in which the tenant agrees to make rent payments to the property owner in exchange for the use of the asset.
lessee
tenant in a lease agreement
lessor
property owner in a lease agreement
leverage
using borrowed funds to increase the return on equity. Also called trading on the equity. It's successful when earning more income on borrowed money than the related interest expense, thereby increasing the earnings for the owners of the business.
market interest rate
interest rate that investors demand for loaning their money. Also called effective interest rate
operating lease
a lease in which the lessee does not assume the risks or rewards of asset ownership
payroll
employee compensation, a major expense of many businesses
pension
employee compensation that will be received during retirement
premium (on a bond)
Excess of a bond's issue price over its face (par) value
present value
amount a person would invest now to receive a greater amount at a future date
serial bonds
bonds that mature in installments over a period of time.
short term notes payable
note payable that is due within one year
stated interest rate
interest rate that determines the amount of cash interest the borrower pays and the investor receives each year
term bonds
bonds that all mature at the same time for a particular issue
times interest earned ratio
ratio of income from operations to interest expense. Measures the number of times that operating income can cover interest expense. (interest coverage ratio)
operating income/ interest expense
trading on the equity
earning more income on borrowed money than the related interest expense, thereby increasing the earnings for the owners of the business. Also called Leverage
underwriter
organization that purchases the bonds from an issuing company and resells them to its clients or sells the bonds for a commission, agreeing to buy all unsold bonds.
authorized stock
maximum number of shares a corporation can issue under its charter
board of directors
group elected by the stockholders to set policy for a corporation and to appoint its officers
book value (of a stock)
amount of owners' equity on the company's books for each share of its stock.
bylaws
constitution for governing a corporation
chairperson
elected by a corporation's board of directors, usually the most powerful person in the corporation
common stock
the most basic form of capital stock.
contributed capital
the amount of stockholders' equity that stockholders have contributed to the corporation. also called paid in capital
cumulative preferred stock
preferred stock whose owners must receive all dividends in arrears before the corporation can pay dividends to the common stockholders.
deficit
debit balance in the retained earnings account
dividend
distribution (usually cash) by a corporation to its stockholders
double taxation
corporations pay income taxes on corporate income. Then, stockholders pay personal income tax on the cash dividends that they receive from corporations.
issued stock
number of shares a corporation has issued to its stockholders
legal capital
minimum amount stockholders' equity that a corporation must maintain for the protection of creditors.
limited liability
no personal obligation of a stockholder for corporation debts.
liquidation value
the amount a corporation must pay a preferred stockholder in the event the company liquidates and goes out of business.
market value (of a stock)
price for which a person could buy or sell a share of stock
outstanding stock
stock in the hands of stockholders
paipar value
arbitrary amount assigned by a company to share of its stock
preferred stock
stock that gives its owners certain advantages, such as the priority to receive dividends before the common stockholders and the priority to receive assets before common stockholders if the corporation liquidates
president
chief operating officer in charge of managing the day to day operations of a corporation
rate of return on common stockholders' equity
net income minus preferred dividends, divided by average common stockholders' equity. a measure of profitability. Also called return on equity
rate of return on total assets
net income plus interest expense divided by average total assets. this ratio measures a company's success in using its assets to earn income for the persons who finance the business. Also called return on assets
redeemable preferred stock
a corporation reserves the right to buy an issue of stock back from its shareholders, with the intent to retire the stock
redemption value
the price a corporation agrees to eventually pay for its redeemable preferred stock, set when the stock is issued
retained earnings
the amount of stockholders' equity that the corporation has earned through profitable operation of the business and has not given back to stockholders
shareholders
persons or other entities that own stock in a corporation.
stated value
an arbitrary amount assigned to no par stock; similar to par value
stock
shares into which the owners' equity pf a corporation is divided
stock dividend
a proportional distribution by a corporation of its own stock to its stockholders
stockholders' equity
the stockholders' ownership interest in the assets of a corporation
stock split
an increase in the number of authorized, issued, and outstanding shares of stock coupled with a proportionate reduction in the stock's par value.
treasury stock
a corporation's own stock that it has issued and later reacquired