Financial Concepts Review

These flashcards cover key vocabulary and concepts related to loans, interest, and financial accounting as discussed in the lecture.

Interest Expense

The cost incurred by an entity for borrowed funds.

Principal

The original sum of money lent or invested, excluding any interest.

Loan Payment

A financial obligation that must be paid back to a lender, which typically includes both principal and interest.

Debit

An accounting entry that either increases an asset or expense account, or decreases a liability or equity account.

Credit

An accounting entry that either increases a liability or equity account, or decreases an asset or expense account.

Discount on Bonds Payable

A contra liability account that represents the difference between the face value of a bond and its selling price when sold below par.

Premium on Bonds Payable

An account that represents the amount by which the selling price of a bond exceeds its face value.

Face Value

The nominal value of a bond to be paid at maturity.

Market Interest Rate

The rate of interest that investors demand for loaning their money.

Present Value

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

Amortization

The process of gradually paying off a debt over time through regular payments.

Installment Loan

A loan that is repaid over time with a set number of scheduled payments.

Cash Flow

The net amount of cash being transferred into and out of a business.

Bondholder

An entity that owns a bond, or debt security, that is issued by a corporation or government.

Semiannual Payments

Payments made twice a year.