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Definition of Debt capacity
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.
Indicator of financial leverage. Compares assets provided by creditors to assets provided
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
An asset requiring fixed dollar payments, such as a government or corporate bond.
The amplification of the return earned on equity when an investment or firm is financed
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
The market for trading debt instruments.
Total debt divided by total assets.
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
Firm's net value of debt
Total firm value minus total firm debt.
debt maturing after more than one year.
Interest rate on debt
The firm's cost of debt capital.
Junior debt (subordinate debt)
debt whose holders have a claim on the firm's assets only after senior
An obligation having a maturity of more than one year from the date it was issued. Also
Indicator of financial leverage. Shows long-term debt as a proportion of the
Long-term debt ratio
The ratio of long-term debt to total capitalization.
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Original issue discount debt (OID debt)
debt that is initially offered at a price below par.
debt that, in the event of default, has first claim on specified assets.
debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.
debt that has been customized for the buyer, often by incorporating unusual options.
debt over which senior debt takes priority. In the event of bankruptcy, subordinated
Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to
debt maturing within one year (short-term debt). See: funded debt.
debt that does not identify specific assets that can be taken over by the debtholder in case of default.
RATIO OF DEBT TO STOCKHOLDERS’ EQUITY
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
The maximum volume of products or services that can be produced given limitations of space,
The proportion of capacity that is able to be utilized to fulfil customer demand for products
Borrowings from financiers.
Sales to customers who have bought goods or services on credit but who have not yet paid their debt.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
A widely used financial statement ratio to assess the
Cost of Debt
The cost of debt (bonds, loans, etc.) that a company is charged for
The percentage of debt that is used in the total capitalization of a
Total Debt to Total Assets Ratio
See debt ratio
a measure of production volume or some other activity base
a short-run concept that represents the
see theoretical capacity
the long-run (5–10 years) average production
the physical production or service volume that a firm could achieve during normal working hours with consideration given to ongoing, expected operating interruptions
the number of total units that could be
the estimated maximum production or
Allowance for bad debts
An offset to the accounts receivable balance, against which
An account receivable that cannot be collected.
Funds owed to another entity.
A debt for which payments will be required for a period of more than
debt with more than 1 year remaining to maturity.
MM's proposition I (debt irrelevance proposition)
The value of a firm is unaffected by its capital structure.
debt that has first claim on specified collateral in the event of default.
debt that may be repaid in bankruptcy only after senior debt is paid.
Any financial asset corresponding to a debt, such as a bond or a treasury bill.
Unused production capacity.
Monetizing the Debt
See printing money.
The debt owed by the government as a result of earlier borrowing to finance budget deficits. That part of the debt not held by the central bank is the publically held national debt.
See national debt.
Publicly Held National Debt
See national debt.
A security representing a debt relationship with an enterprise, including a government
Raising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.
A comparison of debt to equity in a company's capital structure.
Long Term Debt
Liability due in a year or more.
Refers to non-conventional debt that has a greater element of risk than secured debt but has less risk than equity.
Are debt instruments that provide financing, take primary security against either specific or all assets of the borrower, have fixed terms of repayment and charge fixed or floating interest rates.
debt instruments that provide financing for acquisitions, expansion and restructuring, take secondary security against assets, have fixed or flexible terms of repayment and charge fixed or floating interest rates.
Debt (Credit Insurance)
Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. debt may or may not be secured.
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