Chapter 14: Long-term Liabilities Flashcards
Bonds and notes payable
Bonds
A form of an interest-bearing note used by corporations to borrow on a long-term basis.
Earnings per Share
The profitability ratio of net income available to common shareholders to the number of common shares outstanding.
Bond Indenture
The contract between a corporation issuing bonds and the bondholders.
Principle
The face value of a bond or note that must by payed back and the end of the term
Contract Rate
The periodic interest to be paid on the bonds that is identified in the bond indenture; expressed as a percentage of the face amount of the bond.
Market Rate
The rate determined from sales and purchases of similar bonds.
Face amount
An amount at which bonds sell if the market rate equals the contract rate.
Discount
An amount at which bonds sell if the market rate equals the contract rate.
Premium
The selling price of the bonds less the face amount
carrying amount
The balance of the bonds payable account
Installment Note
A debt that requires the borrower to make equal periodic payments to the lender for the term of the note.
Mortgage Note
An installment note that may be secured by a pledge of the borrower’s assets.
Times Interest Earned
A ratio that measures creditor margin of safety for interest payments, calculated as income before interest and taxes divided by interest expense.
