Financing Basics
This type of financing involves borrowing money.
What is debt financing
Most car loans and home loans require these periodic payments.
What are monthly installments?
These bonds are backed by collateral.
What are secured bonds?
The owner in a lease is called this.
What is the lessor?
A bond is this type of instrument used to borrow money.
What is a formal debt instrument?
Interest on this type of financing is tax‑deductible.
What is debt?
Each installment payment includes interest and this.
What is a reduction of the loan balance?
These bonds are not backed by collateral.
What are unsecured bonds?
The user in a lease is called this.
What is the lessee?
The amount repaid at maturity is called this.
What is the face amount or principal?
Dividends belong to this type of financing and are not tax‑deductible.
What is equity financing?
The interest portion of each payment is calculated using this value.
What is the carrying value?
A bond issue that matures on a single date.
What is a term bond?
At the beginning of a lease, the lessee records a lease asset and this liability.
What is lease payable?
Most bonds pay interest this many times per year.
What is twice (semiannually)?
Notes, leases, and bonds are all examples of this.
What is debt?
This schedule shows interest, principal, and carrying value over time.
What is an amortization schedule?
A bond issue that matures in installments.
What is a serial bond?
Lease payable is recorded at this value.
What is the present value of lease payments?
The interest rate printed on the bond is called this.
What is the stated interest rate?
The mixture of liabilities and stockholders’ equity a business uses is called this.
What is capital structure?
On the first payment of the $25,000 loan, the interest was 6%, and we want to recognize the first month. Interest expense was this amount.
What is $125?
(“Interest Expense (= $25,000 × 6% × 1/12)” )
These bonds allow investors to exchange them for stock.
What are convertible bonds?
One reason companies prefer leasing over buying.
What is reduced upfront cash, lower payments, flexibility, or protection against declining asset values
A $100,000 bond at 7% pays this amount every six months.
What is $3,500?
(“$100,000 × 7% × 1/2 year” )