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Financial Terms | |
Debt |
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Definition of DebtDebtBorrowings from financiers. DebtFunds owed to another entity. DebtMoney borrowed.
Related Terms:Allowance for bad debtsAn offset to the accounts receivable balance, against which 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 ![]() 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 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. 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. 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. 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. 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. Acceleration ClauseClause causing repayment of a debt, if specified events occur or are not met. accounts receivableShort-term, non-interest-bearing debts owed to a Accrued InterestThe amount of interest accumulated on a debt security between ACID-TEST RATIOA ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula: acid test ratio (also called the quick ratio)The sum of cash, accounts receivable, and short-term marketable Agency cost viewThe argument that specifies that the various agency costs create a complex environment in amortizationThis term has two quite different meanings. First, it may AmortizationThe reduction of debt by regular payments of interest and principal sufficient to pay off a loan by maturity. Amortization (Credit Insurance)Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to Asset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another Asset substitutionA firm's investing in assets that are riskier than those that the debtholders expected. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing 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. Baker PlanA plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor BankruptcyState of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from bankruptcyThe reorganization or liquidation of a firm that cannot pay its debts. Bankruptcy cost viewThe argument that expected indirect and direct bankruptcy costs offset the other Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. Bankruptcy viewThe argument that expected bankruptcy costs preclude firms from being financed entirely Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization BondBonds are debt and are issued for a period of more than one year. The U.S. government, local BondA long-term debt instrument in which the issuer (borrower) is 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. Bond agreementA contract for privately placed debt. Book valueA company's book value is its total assets minus intangible assets and liabilities, such as debt. A Brady bondsBonds issued by emerging countries under a debt reduction plan. Call a. An option to buy a certain quantity of a stock or commodity for a capitalA very broad term rooted in economic theory and referring to Capital employedThe total of debt and equity, i.e. the total funds in the business. capital expendituresRefers to investments by a business in long-term Capital marketThe market for trading long-term debt instruments (those that mature in more than one year). Capital market imperfections viewThe view that issuing debt is generally valuable but that the firm's Capital structureThe makeup of the liabilities and stockholders' equity side of the balance sheet, especially Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |