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Financial Terms | |
Debt instrument |
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Definition of Debt instrumentDebt 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.
Related Terms:BondA long-term debt instrument in which the issuer (borrower) is Capital marketThe market for trading long-term debt instruments (those that mature in more than one year). Convertible DebentureAre debt instruments that are convertible into common or preferred shares, take secondary or no security against assets, have flexible terms of repayment and charge fixed or floating interest rates. Cost of capitalThe blended cost of a company’s currently outstanding debt instruments Current maturityCurrent time to maturity on an outstanding debt instrument. Debt marketThe market for trading debt instruments. ![]() Euro-noteShort- to medium-term debt instrument sold in the Eurocurrency market. Face ValueThe nominal value which appears on the face of a document recording an entitlement, generally an amount of money that has to be repaid on the maturity of a debt instrument. InstrumentSee debt instrument. Medium-term noteA corporate debt instrument that is continuously offered to investors over a period of Money MarketA financial market in which short-term (maturity of less than a year) debt instruments such as bonds are traded. Mortgagedebt instrument by which the borrower (mortgagor) gives the lender (mortgagee) a lien on property as security for the repayment of a loan. Notedebt instruments with initial maturities greater than one year and less than 10 years. PrincipalThe obligation due under a debt instrument exclusive of interest. 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. 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. Allowance for bad debtsAn offset to the accounts receivable balance, against which Alternative mortgage instrumentsVariations of mortgage instruments such as adjustable-rate and variablerate 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 Cost of DebtThe cost of debt (bonds, loans, etc.) that a company is charged for 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 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. 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 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. Debtor-in-possession financingNew debt obtained by a firm during the Chapter 11 bankruptcy process. DebtorsSales to customers who have bought goods or services on credit but who have not yet paid their debt. Deliverable instrumentThe asset in a forward contract that will be delivered in the future at an agree-upon price. Derivative instrumentsContracts such as options and futures whose price is derived from the price of the 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. Fixed-income instrumentsAssets that pay a fixed-dollar amount, such as bonds and preferred stock. Funded debtdebt maturing after more than one year. funded debtdebt with more than 1 year remaining to maturity. InstrumentsFinancial securities, such as money market instruments or capital market insturments. 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 Limited-liability instrumentA security, such as a call option, in which the owner can only lose his initial Limited-liability instrumentA security, such as a call option, in which the owner can only lose his initial investment. 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. 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. Original issue discount debt (OID debt)debt that is initially offered at a price below par. 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: 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. Senior debtdebt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment. 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. 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. capital structure, or capitalizationTerms that refer to the combination of Credit riskThe risk that an issuer of debt securities or a borrower may default on his obligations, or that the Substitute saleA method for hedging price risk that utilizes debt-market instruments, such as interest rate Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |