Long-Term Liabilities in Financial Accounting

Flashcards covering key terms and concepts related to long-term liabilities in financial accounting.

Capital Structure

The mixture of liabilities and stockholders' equity that a business uses.

Debt Financing

Borrowing money to finance a company's operations.

Equity Financing

Obtaining investment from stockholders to fund business activities.

Interest Expense

The cost of borrowing, which is tax-deductible.

Dividends

Payments made to stockholders, which are not tax-deductible and not considered an expense.

Installment Notes

Loans requiring periodic payments that include interest and principal repayment.

Amortization Schedule

A table detailing each payment of a loan, including interest and principal components.

Bonds

Formal debt instruments obligating the borrower to repay a specified principal amount at maturity, along with periodic interest.

Secured Bonds

Bonds backed by collateral.

Unsecured Bonds

Bonds that are not backed by collateral.

Term Bond

A bond issue that matures on a single specified date.

Serial Bond

A bond issue that matures in installments over time.

Callable Bond

A bond that can be redeemed before its maturity date.

Convertible Bond

A bond that can be converted into a specified number of shares of common stock.

Market Interest Rate

The rate of interest that investors demand for a bond, which may differ from the stated interest rate.

Bond Retirement

The process of paying back bondholders at the bond's maturity or before.

Early Extinguishment of Debt

Retirement of bonds before their maturity date, which may result in a gain or loss.