Learnsmart Ch. 9

2 types of financing

debt and equity

Equity

financing refers to obtaining investment from stockholderts

Bonds will be issued at a premium if the stated interest rate is:

Greater than the market interest rate

_______ bonds are supported by a specific asset the issuer pledges as collateral.

Secured

______ bonds require payment of the full principal amount of bond at end of term loan.

Term

The _______ interest rate is used to compute the cash interest paid to the bond holders.

stated

The _______ interest rate is the interest rate on the date the bonds are issued.

Market

The current balance of bonds payable is aka

bonds' carrying value

Most corporate bonds pay interest...

semi annually

Default Risk

The possibility that a company will be unable to pay its bonds payable and the related interest when due.

Lease

a contractual agreement in which an owner provides a user the right to use an asset for a specified period of time.

Convertible bonds are retired when

the bondholder exchanges them for the issuing company's stock.

Debt to Equity

total liabilities/stockholder equity