Ch. 14- Planning Debt Financing Flashcards
What is a bond?
A long-term debt instrument issued by corporations to raise money from the public.
What is a bearer bond?
A bond that is payable to the bearer or person who has physical possession of the bond.
What is a bond certificate?
The note given to bond holders.
What is a bond indenture?
The bond contract.
What is a bond issue?
A group of bonds.
What is a callable bond?
A bond that gives the company issuing the bond the right to buy it back before the maturity date at a specified price.
What is a capital lease?
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.
What is the carrying value of debt?
Remaining liability on the pro forma balance sheet.
What is collateral?
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.
What is a convertible bond?
A bond feature that allows bond holders to exchange the bonds for common or preferred stock.
What are covenants?
Restrictions that lenders place on the borrowing company to protect the lender’s interest.
What are debenture bonds?
Unsecured bonds; bonds with no specific assets pledged as collateral.
What is a discount on a note?
The excess of the face value of a note over its present value (cash proceeds).
What is the face rate on the note?
It is used to determine the cash interest the borrower pays.
What is the face value of the note?
The amount the borrower will repay the lender for principal.
Who is the holder of the note?
The lender.
What is a lease?
An agreement to convey the use of a tangible asset from one party to another in return for rental payments.
What is a lump-sum payment note?
A debt instrument that contains a promise to pay a specific amount of money at the end of a specified period of time.
Who is the maker of the note?
The borrower.
What is market, or effective, interest rate?
The actual interest rate charged on a note’s proceeds.
What is a mortgage?
A long-term note secured with real estate, such as land or buildings, as collateral.
What is a mortgage bond?
A bond that is secured with real estate.
What is an operating lease?
A rental agreement for a period of time substantially shorter than the economic life of the leased asset.
What is a periodic payment and lump-sum note?
A debt instrument that combines periodic payments and a final lump-sum payment.
What is a periodic payment note?
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.
What is a premium on a note?
The amount that the present value (cash proceeds) of a note exceeds it’s face value.
What are the proceeds of the note?
The amount of cash raised from issuance of a note.
What are registered bonds?
Bonds that are numbered and made payable in the name of the bond holder.
What is a secured bond?
A bond that has some part of the issuing corporation’s assets serving as security for the loan.
What is a serial bond?
A bond issue that has specified portions of the bond issue coming due periodically over the life of the bond issue.
What are subordinated bonds?
Unsecured bonds whose rights to repayment are ranked after, or subordinated to, some other person or group of creditors.
What is an unsecured bond?
A bond that does not have any specific assets pledged as security against its repayment.
