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Financial Terms | |
Debt Security |
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Definition of Debt SecurityDebt SecurityA security representing a debt relationship with an enterprise, including a government
Related Terms:Accrued InterestThe amount of interest accumulated on a debt security between bondA debt security issued by a government or company. You receive regular interest payments at specified rates while you hold the bond and you receive the face value when it matures. Short-term bonds mature in less than five years; medium-term bonds mature in six to ten years; and long-term bonds mature in eleven years or greater. Coupon / CouponsThe periodic interest payment(s) made by the issuer of a bond Coupon RateThe rate of interest paid on a debt security. Generally stated on an DefaultFailure to make timely payment of interest or principal on a debt security or to otherwise comply DurationThe weighted average of the time until maturity of each of the EurobondA debt security issued in a market other than the home market of ![]() Fixed-dollar securityA nonnegotiable debt security that can be redeemed at some fixed price or according to Held-to-Maturity SecurityA debt security for which the investing entity has both the positive Redeemable Preferred StockA preferred stock issue that must be redeemed by the issuing enterprise or is redeemable at the option of the investor. Considered a debt security for accountingpurposes. Reinvestment rateThe rate at which an investor assumes interest payments made on a debt security can be Yield to MaturityThe measure of the average rate of return that will be earned on a Zero coupon bondSuch a debt security pays an investor no interest. It is sold at a discount to its face price Allowance for bad debtsAn offset to the accounts receivable balance, against which Asset-backed securityA security that is collateralized by loans, leases, receivables, or installment contracts Available-for-Sale SecurityA debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period. ![]() 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 Convertible securityA security that can be converted into common stock at the option of the security holder, 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 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 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. Derivative securityA financial security, such as an option, or future, whose value is derived in part from the Employee Retirement Income Security Act of 1974 (ERISA)A federal Act that sets minimum operational and funding standards for employee benefit Equity SecurityAn ownership interest in an enterprise, including preferred and common stock. Exchangeable Securitysecurity that grants the security holder the right to exchange the security for the Firm's net value of debtTotal firm value minus total firm debt. Fixed-income securityA security that pays a specified cash flow over a floating-rate securitysecurity paying dividends or interest that vary with short-term interest rates. Funded debtdebt maturing after more than one year. funded debtdebt with more than 1 year remaining to maturity. Host securityThe security to which a warrant is attached. Hybrid securityA convertible security whose optioned common stock is trading in a middle range, causing 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. Marketable securityAn easily traded investment, such as treasury bills, which is 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. Monthly income preferred security (MIP)Preferred stock issued by a subsidiary located in a tax haven. Mortgage pass-through securityAlso called a passthrough, a security created when one or more mortgage 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. Nonmarketable SecurityA debt or equity security for which there is no posted price or bidand- Original issue discount debt (OID debt)debt that is initially offered at a price below par. Primitive securityAn instrument such as a stock or bond for which payments depend only on the financial 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. SecurityPiece of paper that proves ownership of stocks, bonds and other investments. SecurityEither the collateral on a loan, or some type of equity ownership or debt, such SecurityA share or an interest in a property or an enterprise such as a stock certificate or a bond. SecurityCollateral offered by a borrower to a lender to secure a loan. Security characteristic lineA plot of the excess return on a security over the risk-free rate as a function of Security deposit (initial)Synonymous with the term margin. A cash amount of funds that must be deposited Security deposit (maintenance)Related: Maintenance margin security market line (SML). A description of Security market lineLine representing the relationship between expected return and market risk. Security Market LineA graph illustrating the equilibrium relationship between the security market lineRelationship between expected return and beta. Security selection decisionChoosing the particular securities to include in a portfolio. Security ValueThe monetary value placed on security by a lender in determining the extent to which it can make loans against such security. 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. Social Security Act of 1935A federal Act establishing Old Age and Survivor’s 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 Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |