ACC201 Exam 3

Chapters 7/8

collateral

assets or things of value belonging to a borrower, thats the lender can seize and sell in the event the borrower defaults

indenture

the legal document between a bond issuer and a bond holder

par value

the denomination in which bonds are offered for sale

contract rate

the rate of interest a bond will pay as stated in the indenture

amortization schedule

a schedule providing for the payment breakdown of a loan between interest and principal

debenture

a bond or note that is unsecured

serial bond

provides for a portion of the bond principal to be paid off each year

bond

a type of security in which the issuer promises to repay an amount of money borrowed, plus interest, to a creditor at some future date

registered bond

issuers of these know who hold them, should receive periodic interest payments, and principle at maturity

convertible bond

may be surrendered to the issuer and exchanged for the issuer company’s common stock

default

borrower doesn’t make the required payments or otherwise fails to honor the terms of a loan

sinking fund bonds

requires the issuer to regularly place money in escrow for the ultimate retirement of the bonds at maturity

long-term liability

does not need to be satisfied or paid using current assets in 1 year or 12 months

term bond

the principle is reurned to the bondholder at maturity

term-loan

provides the borrower with a sum of money upfront with a promise to repay, with interest, at agreed regular intervals

bond discount

this occurs when the bond’s coupon rate of interest is less than the market rate of interest and investors are willing to pay less than par value

adjunt account

a general ledger account that increases a liability

callable bond

the issuer has the option to call all or a part of an issue and retire before their maturity date

bond premium

this occurs when the bonds coupon rate of interest is more than the market rate of interest and investors are willing to pay more than par value

LLC/LLP

a form of a business entity whose participants enjoy limited liability in that their assets outside the business are not at risk

stock split

awarding additional shares of stock to existing shareholders in some split proportion

income stock

these stocks pay dividends on a regular basis

small stock dividend

a distribution of 25% or less of the outstanding stock of a corporation

additional paid in capital

the difference between the selling price of a stock and its par or stated value

EPS

the net income earned per share of common stock

cumulative preferred

gives the shareholder rights to dividends when no dividends are declared

treasury stock

shares of a corporation’s own stock that were issued, outstanding and repurchased and held by the corporation

large stock dividend

a distribution of more than 25% of the outstanding stock of a corporation

growth stock

these stocks are held because they are expected to grow in market value

dividend

distributions to shareholders of a corporation’s earnings made from retained earnings

authorized shares

the number of shares of stock in the articles of incorporation and approved by the state if incorporation

corporation

a form of business organization whose shareholders have no liability for its acts, has unlimited life, and pays taxes on its income

date of declaration

the date the board of directors of a corporation declares a dividend would be paid to shareholders

par value stock

the minimal value placed on a share of stock, set in the articles of incorporation, and below which the stock should never be sold

stated value

no-par stock that has had a minimal value placed on a share by the corporation board of directors, basically for accounting purposes

issued shares

the number of authorized shares of a corporation’s stock that have been sold

date of payment

the date on which a cash dividend will be paid

preemptive right

common shareholders have the right to receive their proportional number of shares of subsequent stock offerings such that their ownership percentage is not diluted

partnership

a form of business with two or more owners, liability both jointly and severally for each other’s acts, and assets inside and outside the business are at risk

issuer corporation

a corporation that has gone to the effort and expense to register their stock with the Securities and Exchange Commission giving them permission to sell their shares to the public