Long term liabilities (LO 13.1)

Bond

A special kind of loan a company takes to raise money, typically sold to multiple investors.

Notes Payable

A legal document created when a single lender gives money to a company; includes loan amount, due date, and interest rate.

Bonds Payable

A type of loan similar to notes payable but split into smaller amounts, allowing the company to attract multiple investors.

Bond Contract

A legal agreement also known as bond indenture that explains repayment amount, interest rate, and payment frequency.

Face Value

The amount a company will repay when the bond matures.

Interest Rate

The percentage of interest to be paid on the bond, usually determined at the time of issuance.

Secured Bonds

Bonds that are backed by something valuable, offering collateral to lenders.

Unsecured Bonds

Bonds that do not have collateral backing them; riskier for investors.

Debenture Bonds

Regular unsecured bonds.

Callable Bonds

Bonds that can be repaid early by the issuing company before the maturity date.

Convertible Bonds

Bonds that can be converted into shares of common stock.

Deep-Discount Bonds

Bonds sold at a significant discount that pay no interest until maturity.

Revenue Bonds

Bonds reimbursed with revenue from specific projects or services.

Income Bonds

Bonds that only pay interest if the issuing company is profitable.

Bond Indenture

The formal agreement or contract between the bond issuer and bondholders.

Market Rate

The prevailing interest rate in the market that affects the bond's selling price.

Stated Rate

The interest rate written into the bond's contract.

Carrying Value

The amount recorded on the company's balance sheet for the bond, which may change due to premiums or discounts.

Amortization

The process of gradually writing off the initial cost of an asset over a period.

Effective Interest Rate

The interest rate that exactly discounts future cash flows of a bond to the present value.

Cash Payment

The fixed amount of interest paid to bondholders based on the bond's stated interest rate.

Loss on Redemption

A loss incurred when the reacquisition price of a bond is higher than its carrying value.

Gain on Redemption

A gain incurred when the reacquisition price of a bond is lower than its carrying value.

Premium on Bonds Payable

The amount by which the issue price of a bond exceeds its face value.

Discount on Bonds Payable

The amount by which the face value of a bond exceeds its issue price.

Interest Expense

The expense recognized on the income statement, reflecting the cost of borrowing.

Accounting Premium Amortization

The process of recognizing the premium on bonds payable over the life of the bond.

Journal Entry

An official record of a financial transaction.

Issuance of Bonds

The process of selling bonds to raise capital.

Retirement of Bonds

The repayment of bonds upon maturity or earlier redemption.

Straight-Line Method

An amortization method that allocates an equal amount of the premium or discount each period.

Effective Interest Method

An amortization method where interest expense reflects the bond’s carrying amount multiplied by the effective interest rate.

Bond Holder

An individual or institution that owns a bond.

Financial Obligation

The duty of a company to pay back borrowed funds as specified in financial agreements.

Investment Banks

Financial institutions that assist in the issuance and sale of bonds.

Credit Rating

A measurement of the creditworthiness of the issuer, influencing the bond's interest rate.

Maturity Date

The date on which the bond's face value is repaid to bondholders.

Underwriters

Financial entities that help companies sell bonds by assessing risk and pricing.

Cash Flow

The total amount of money being transferred into and out of a business.

Collateral

An asset pledged as security for repayment of a loan.

Financial Instruments

Contracts that create financial assets for one entity and financial liabilities for another.

Investor

An individual or entity that allocates capital with the expectation of a future financial return.

Principal Repayment

The return of the bond's face value at maturity.

Investment Risks

The possibility of losing principal or not receiving expected returns on investments.

Annuity

A series of equal payments made at regular intervals over a specified period.

Effective Yield

The actual return on a bond, taking into account the price paid for it.

Governing Document

A legal document outlining the terms of the bond.

Debt Financing

The method of raising funds by borrowing.

Advancement of Funds

The act of providing money to a borrower, typically secured by a bond.

Discount Rate

The interest rate used to discount future cash flows of a bond.

Investment Strategy

An approach to targeting either risks or returns through bond investing.

Tax Implications

Financial effects on a company or investor's tax situation based on bond transactions.

Cash Flow Management

The strategy of tracking and optimizing incoming and outgoing cash.

Dividends

Payments made by a corporation to its shareholder members.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity.

Financial Reporting

The process of disclosing financial information to stakeholders.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of an investment zero.

Notes Receivable

Money owed to a company by customers or other parties.

Interest Compounding

The process where interest is calculated on both the initial principal and the accumulated interest from previous periods.

Financial Management

The strategic planning, organizing, directing, and controlling of financial activities.

Regulatory Compliance

The process whereby companies ensure they are following all relevant laws and regulations.

Bond Market

The financial market where participants issue and trade debt securities.

Credit Risk

The risk that a bond issuer will fail to make payments on interest or principal.

Repayment Schedule

The plan that outlines when and how much will be paid back to bondholders.

Return on Investment (ROI)

A measure used to evaluate the efficiency or profitability of an investment.

Callable Securities

Investments that can be redeemed (bought back) by the issuer before maturity.

Yield to Maturity (YTM)

The total return anticipated on a bond if held until it matures.

Fair Value

An estimate of the potential market price of a security, property, or commodity.

Retractable Bonds

Bonds that give the bondholder a right to sell the bonds back to the issuer at specified prices.

Settlement Date

The date when securities are actually transferred from seller to buyer.

Performance Metrics

Standards of measurement of the efficiency of investment.

Investment Horizon

The total length of time an investor expects to hold a security or portfolio.

Market Volatility

The rate at which the price of securities increases or decreases for a given set of returns.

Net Asset Value (NAV)

The total value of an entity's assets minus its liabilities.

Investment Portfolio

A collection of financial investments like stocks, bonds, commodities, currencies, and cash equivalents.

Termination Risk

The risk that a bond may end before the maturity date.

Equity Financing

Raising capital through the sale of shares in the business.

Securities Exchange

A marketplace where securities, such as stocks and bonds, are bought and sold.

Investment Grade

A rating that signifies that a municipal or corporate bond has a relatively low risk of default.

Market Liquidity

The ability to quickly buy or sell an asset without causing a significant impact on its price.

Default Risk

The risk that the issuer of a bond will fail to make the required payments.

Pre-refunding

A process for replacing existing bonds with new bonds.

Convertible Bonds

Bonds that can be converted into a predetermined amount of the company's equity capital.

Financing Activities

Transactions that affect the cash flows of a company, including issuing bonds and repaying debts.

Market Capitalization

The total value of a company's outstanding shares of stock.

Investment Research

The process of gathering data and analyzing for investment decision-making.

Financial Analysts

Professionals tasked with assessing the financial status of companies and their stocks.

Regulated Market

A marketplace that is monitored and enforced by government regulations.