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Financial Terms | |
Debt Financing |
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Definition of Debt FinancingDebt FinancingRaising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.
Related Terms:Debtor-in-possession financingNew debt obtained by a firm during the Chapter 11 bankruptcy process. Agency cost viewThe argument that specifies that the various agency costs create a complex environment in financial leveragedebt financing amplifies the effects of changes in operating income on the returns to stockholders. financial slackReady access to cash or debt financing. LeverageThe use of debt financing. Leveragehe use of debt financing. Allowance for bad debtsAn offset to the accounts receivable balance, against which ![]() Asset-based financingMethods of financing in which lenders and equity investors look principally to the Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. Back-to-back financingAn intercompany loan channeled through a bank. Bad debtAn account receivable that cannot be collected. Bad debtsThe amount of accounts receivable that is not expected to be collected. bad debtsRefers to accounts receivable from credit sales to customers Bridge financingInterim financing of one sort or another used to solidify a position until more permanent Cash Flow Provided or Used from Financing ActivitiesCash receipts and payments involving CASH FLOWS FROM FINANCING ACTIVITIESA section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations. ![]() Cost of DebtThe cost of debt (bonds, loans, etc.) that a company is charged for Cost of lease financingA lease's internal rate of return. DebtMoney borrowed. DebtBorrowings from financiers. DebtFunds owed to another entity. Debt capacityAbility to borrow. The amount a firm can borrow up to the point where the firm value no Debt CapacityAn assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources. 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. Debt displacementThe amount of borrowing that leasing displaces. Firms that do a lot of leasing will be Debt/equity ratioIndicator of financial leverage. Compares assets provided by creditors to assets provided Debt/Equity RatioA comparison of debt to equity in a company's capital structure. Debt instrumentAn asset requiring fixed dollar payments, such as a government or corporate bond. Debt InstrumentAny financial asset corresponding to a debt, such as a bond or a treasury bill. Debt leverageThe amplification of the return earned on equity when an investment or firm is financed Debt limitationA bond covenant that restricts in some way the firm's ability to incur additional indebtedness. Debt marketThe market for trading debt instruments. Debt ratioTotal debt divided by total assets. Debt RatioThe percentage of debt that is used in the total capitalization of a Debt reliefReducing the principal and/or interest payments on LDC loans. Debt securitiesIOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and Debt SecurityA security representing a debt relationship with an enterprise, including a government Debt serviceInterest payment plus repayments of principal to creditors, that is, retirement of debt. Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Debt service parity approachAn analysis wherein the alternatives under consideration will provide the firm Debt swapA set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank debt-to-equity ratioA widely used financial statement ratio to assess the Debtor in possessionA firm that is continuing to operate under Chapter 11 bankruptcy process. DebtorsSales to customers who have bought goods or services on credit but who have not yet paid their debt. Export FinancingA range of financing products (loans. guarantees, letters of credit, insurance etc.) in support of a variety of activities which help Canadian firms expand into new export markets. Federal Financing BankA federal institution that lends to a wide array of federal credit agencies funds it financing activitiesOne of the three classes of cash flows reported in the financing decisiona judgment made regarding the method financing decisionDecision as to how to raise the money to pay for investments in real assets. Financing decisionsDecisions concerning the liabilities and stockholders' equity side of the firm's balance Financing InstrumentsThis is a generic term that refers to the many different forms of financing a business may use. For example - loans, shares, and bonds are all considered financing instruments. Firm's net value of debtTotal firm value minus total firm debt. Funded debtdebt maturing after more than one year. funded debtdebt with more than 1 year remaining to maturity. Interest rate on debtThe firm's cost of debt capital. Junior debt (subordinate debt)debt whose holders have a claim on the firm's assets only after senior Long-term debtAn obligation having a maturity of more than one year from the date it was issued. Also Long-term debtA debt for which payments will be required for a period of more than Long Term DebtLiability due in a year or more. Long-term debt/capitalizationIndicator of financial leverage. Shows long-term debt as a proportion of the Long-term debt ratioThe ratio of long-term debt to total capitalization. Long-term debt to equity ratioA capitalization ratio comparing long-term debt to shareholders' equity. Mezzanine DebtRefers to non-conventional debt that has a greater element of risk than secured debt but has less risk than equity. MM's proposition I (debt irrelevance proposition)The value of a firm is unaffected by its capital structure. Monetizing the DebtSee printing money. Multi-option financing facilityA syndicated confirmed credit line with attached options. National DebtThe 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. Net financing costAlso called the cost of carry or, simply, carry, the difference between the cost of financing Off-balance-sheet financingfinancing that is not shown as a liability in a company's balance sheet. Original issue discount debt (OID debt)debt that is initially offered at a price below par. Planned financing programProgram of short-term and long-term financing as outlined in the corporate Production payment financingA method of nonrecourse asset-based financing in which a specified Project Financingdebt finance, usually non-recourse, provided by financial institutions for the development and construction of a new project. Public DebtSee national debt. Publicly Held National DebtSee national debt. RATIO OF DEBT TO STOCKHOLDERS’ EQUITYA ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company: Refinancing (Credit Insurance)Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges. Secured debtdebt that, in the event of default, has first claim on specified assets. secured debtdebt that has first claim on specified collateral in the event of default. Seed Financing/CapitalGenerally, refers to the first contribution of capital toward the financing requirements of a start-up business. Senior debtdebt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment. Senior DebtAre 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. Structured debtdebt that has been customized for the buyer, often by incorporating unusual options. Subordinated debtdebt over which senior debt takes priority. In the event of bankruptcy, subordinated subordinated debtdebt that may be repaid in bankruptcy only after senior debt is paid. Subordinated Debtdebt 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. Threshold for refinancingThe point when the WAC of an MBS is at a level to induce homeowners to Total debt to equity ratioA capitalization ratio comparing current liabilities plus long-term debt to Total Debt to Total Assets RatioSee debt ratio Trade debtAccounts payable. Unfunded debtdebt maturing within one year (short-term debt). See: funded debt. Unsecured debtdebt that does not identify specific assets that can be taken over by the debtholder in case of default. Baker PlanA plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor Corporate tax viewThe argument that double (corporate and individual) taxation of equity returns makes Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Leverage ratiosMeasures of the relative contribution of stockholders and creditors, and of the firm's ability LienA security interest in one or more assets that is granted to lenders in connection with secured debt Pecking-order view (of capital structure)The argument that external financing transaction costs, especially Private Export Funding Corporation (PEFCO)Company that mobilizes private capital for financing the Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |