Chapter 9 Acct
Return on assets
Net Income / Avg Total assets
Formula Return on shareholder Equity
Net Income / Avg shareholders' equity
Methods of long-term financing with Debt
Notes payable Leases Bonds
The debt to equity ratio
Total Liab / Total Stockholders' equity
Market Interest rate
Yield rate Effective interest rate
A series of equal amounts paid or received over equal time periods
Annuity
Corporation that wishes to borrow from the general public rather than a bank
BONDs
Mixed of debt financing and equity financing
Capital Structure
Time Interest Earned
EBIT / Interest Expense
Two types of Financing
Equity and Debt
Liang Corporation issues a $100000 bond at a discount for $95083 The coupon rate is 10% and the effective interest rate is 12% The bonds pay interest semiannually on June 30 and December 31. The journal entry to record the interest payment on June 30
Interest expense ( 95083 * 6%) - Cash Interest paid ( 100000 * 5%) = Discount $705
Callable bonds can be redeemed
bond issuer
Bonds
most common form of corporate debt