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accounting 2 > Ch. 14- Planning Debt Financing > Flashcards

Ch. 14- Planning Debt Financing Flashcards

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0
Q

What is a bond?

A

A long-term debt instrument issued by corporations to raise money from the public.

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1
Q

What is a bearer bond?

A

A bond that is payable to the bearer or person who has physical possession of the bond.

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2
Q

What is a bond certificate?

A

The note given to bond holders.

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3
Q

What is a bond indenture?

A

The bond contract.

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4
Q

What is a bond issue?

A

A group of bonds.

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5
Q

What is a callable bond?

A

A bond that gives the company issuing the bond the right to buy it back before the maturity date at a specified price.

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6
Q

What is a capital lease?

A

A lease in which a company acquires such a substantial interest in the leased property that, for all practical purposes, the lessee company owns the asset.

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7
Q

What is the carrying value of debt?

A

Remaining liability on the pro forma balance sheet.

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8
Q

What is collateral?

A

An asset or group of assets specifically named in a debt agreement to which the creditor has claim if the borrower fails to comply with the terms of the note.

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9
Q

What is a convertible bond?

A

A bond feature that allows bond holders to exchange the bonds for common or preferred stock.

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10
Q

What are covenants?

A

Restrictions that lenders place on the borrowing company to protect the lender’s interest.

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11
Q

What are debenture bonds?

A

Unsecured bonds; bonds with no specific assets pledged as collateral.

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12
Q

What is a discount on a note?

A

The excess of the face value of a note over its present value (cash proceeds).

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13
Q

What is the face rate on the note?

A

It is used to determine the cash interest the borrower pays.

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14
Q

What is the face value of the note?

A

The amount the borrower will repay the lender for principal.

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15
Q

Who is the holder of the note?

A

The lender.

16
Q

What is a lease?

A

An agreement to convey the use of a tangible asset from one party to another in return for rental payments.

17
Q

What is a lump-sum payment note?

A

A debt instrument that contains a promise to pay a specific amount of money at the end of a specified period of time.

18
Q

Who is the maker of the note?

A

The borrower.

19
Q

What is market, or effective, interest rate?

A

The actual interest rate charged on a note’s proceeds.

20
Q

What is a mortgage?

A

A long-term note secured with real estate, such as land or buildings, as collateral.

21
Q

What is a mortgage bond?

A

A bond that is secured with real estate.

22
Q

What is an operating lease?

A

A rental agreement for a period of time substantially shorter than the economic life of the leased asset.

23
Q

What is a periodic payment and lump-sum note?

A

A debt instrument that combines periodic payments and a final lump-sum payment.

24
Q

What is a periodic payment note?

A

A debt instrument that contains a promise to make a series of equal payments consisting of both interest and principal at equal time intervals over a specified time period.

25
Q

What is a premium on a note?

A

The amount that the present value (cash proceeds) of a note exceeds it’s face value.

26
Q

What are the proceeds of the note?

A

The amount of cash raised from issuance of a note.

27
Q

What are registered bonds?

A

Bonds that are numbered and made payable in the name of the bond holder.

28
Q

What is a secured bond?

A

A bond that has some part of the issuing corporation’s assets serving as security for the loan.

29
Q

What is a serial bond?

A

A bond issue that has specified portions of the bond issue coming due periodically over the life of the bond issue.

30
Q

What are subordinated bonds?

A

Unsecured bonds whose rights to repayment are ranked after, or subordinated to, some other person or group of creditors.

31
Q

What is an unsecured bond?

A

A bond that does not have any specific assets pledged as security against its repayment.

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