Debt Financing Module 4

These flashcards cover key concepts in debt financing, focusing on terms related to lease accounting and financial management.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Lease Liability

A legal obligation to make lease payments over the term of the lease.

Amortization Expense

The allocation of the cost of an asset over its useful life.

Principal Reduction

The amount by which the principal balance of a loan is reduced during a given period of time.

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Debt Financing

A method of raising capital through borrowing.

Interest Expense

The cost incurred by an entity for borrowed funds.

Amortization Table

A schedule of payments showing principal and interest over the life of a loan.

Economic Life

The estimated period during which an asset is expected to be economically useful to the owner.

Present Value Annuity Factor (PVAF)

A factor used to calculate the present value of a series of equal payments made at regular intervals.