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Definition of Debt Security
A security representing a debt relationship with an enterprise, including a government
The amount of interest accumulated on a debt security between
A 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 / Coupons
The periodic interest payment(s) made by the issuer of a bond
The rate of interest paid on a debt security. Generally stated on an
Failure to make timely payment of interest or principal on a debt security or to otherwise comply
The weighted average of the time until maturity of each of the
A debt security issued in a market other than the home market of
A nonnegotiable debt security that can be redeemed at some fixed price or according to
A debt security for which the investing entity has both the positive
Redeemable Preferred Stock
A 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.
The rate at which an investor assumes interest payments made on a debt security can be
Yield to Maturity
The measure of the average rate of return that will be earned on a
Zero coupon bond
Such a debt security pays an investor no interest. It is sold at a discount to its face price
Allowance for bad debts
An offset to the accounts receivable balance, against which
A security that is collateralized by loans, leases, receivables, or installment contracts
A 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.
An account receivable that cannot be collected.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
A security that can be converted into common stock at the option of the security holder,
Cost of Debt
The cost of debt (bonds, loans, etc.) that a company is charged for
Borrowings from financiers.
Funds owed to another entity.
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.
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.
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
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.
An asset requiring fixed dollar payments, such as a government or corporate bond.
Any financial asset corresponding to a debt, such as a bond or a treasury bill.
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.
The percentage of debt that is used in the total capitalization of a
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 coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
A widely used financial statement ratio to assess the
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.
Sales to customers who have bought goods or services on credit but who have not yet paid their debt.
A 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
An ownership interest in an enterprise, including preferred and common stock.
security that grants the security holder the right to exchange the security for the
Firm's net value of debt
Total firm value minus total firm debt.
A security that pays a specified cash flow over a
security paying dividends or interest that vary with short-term interest rates.
debt maturing after more than one year.
debt with more than 1 year remaining to maturity.
The security to which a warrant is attached.
A convertible security whose optioned common stock is trading in a middle range, causing
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
A debt for which payments will be required for a period of more than
Long Term Debt
Liability due in a year or more.
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.
An easily traded investment, such as treasury bills, which is
Refers 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 Debt
See printing money.
Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven.
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
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.
A 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.
An instrument such as a stock or bond for which payments depend only on the financial
See national debt.
Publicly Held National Debt
See national debt.
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:
debt that, in the event of default, has first claim on specified assets.
debt that has first claim on specified collateral in the event of default.
Piece of paper that proves ownership of stocks, bonds and other investments.
Either the collateral on a loan, or some type of equity ownership or debt, such
A share or an interest in a property or an enterprise such as a stock certificate or a bond.
Collateral offered by a borrower to a lender to secure a loan.
Security characteristic line
A 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 line
Line representing the relationship between expected return and market risk.
Security Market Line
A graph illustrating the equilibrium relationship between the
security market line
Relationship between expected return and beta.
Security selection decision
Choosing the particular securities to include in a portfolio.
The monetary value placed on security by a lender in determining the extent to which it can make loans against such security.
debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.
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.
Social Security Act of 1935
A federal Act establishing Old Age and Survivor’s
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
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