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Financial Accounting Chapter 9

Financial Accounting Chapter 9 - -A bond that sells for...

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Financial Accounting Chapter 9 Bond Indenture: - The document specific promises made to bondholders are described in Two Types of Financing: - Equity financing and debt financing Debt to Equity Ratio - Total liabilities divided by total stockholders’ equity Capital Structure: - Mixture of debt financing and equity financing a company uses Times Interest Earned Formula: - Earnings before interest and taxes divided by interest expense Financing with Liabilities: - Requires borrowing Financing with Equity: - Issuing shares of stock Stated Rate of Interest: - Interest rate printed on the bond Market Rate of Interest: - Current rate of interest being paid on investments with similar characteristics Serial Bonds: - Bonds that systematically mature over a period of time Retired Bonds: - When a corporation repurchases its bonds from the bondholders
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Unformatted text preview: -A bond that sells for less than its face amount Formula for Return on Equity:-Net income divided by average total shareholders’ equity Methods of Long Term Financing with Debt:-Notes payable, bonds, leases Term Bonds:-Bonds that mature on one specific date Serial Bonds:-Bonds that mature in installments Formula to Compute the Return on Assets:-Net income divided by average total assets Premium:-A bond that sells for more than its face amount Early Retirement of a Bond Includes:-Recording of a gain or loss-Payment of cash-Elimination of the liability Convertible Bonds:-Retired when the bondholder exchanges them for the issuing company’s stock Lease:-A contractual arrangement in which an owner provides a user the right to use an asset for a specified period of time...
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