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Long-term debt

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Definition of Long-term debt

Long-term Debt Image 1

Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.


Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.


Long Term Debt

Liability due in a year or more.



Related Terms:

Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the
capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and
common stockholder equity.


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.



Allowance for bad debts

An offset to the accounts receivable balance, against which
bad debts are charged. The presence of this allowance allows one to avoid severe
changes in the period-to-period bad debt expense by expensing a steady amount to
the allowance account in every period, rather than writing off large bad debts to
expense on an infrequent basis.


Bad debt

An account receivable that cannot be collected.


Long-term Debt Image 2

Bad debts

The amount of accounts receivable that is not expected to be collected.


bad debts

Refers to accounts receivable from credit sales to customers
that a business will not be able to collect (or not collect in full). In hindsight,
the business shouldn’t have extended credit to these particular
customers. Since these amounts owed to the business will not be collected,
they are written off. The accounts receivable asset account is
decreased by the estimated amount of uncollectible receivables, and the
bad debts expense account is increased this amount. These write-offs
can be done by the direct write-off method, which means that no
expense is recorded until specific accounts receivable are identified as
uncollectible. Or the allowance method can be used, which is based on
an estimated percent of bad debts from credit sales during the period.
Under this method, a contra asset account is created (called allowance
for bad debts) and the balance of this account is deducted from the
accounts receivable asset account.


Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.


coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model


Cost of Debt

The cost of debt (bonds, loans, etc.) that a company is charged for
borrowing funds. A component of the cost of capital.


Credit Terms

Conditions under which credit is extended by a lender to a borrower.


Debt

Money borrowed.


Debt

Borrowings from financiers.


Debt

Funds owed to another entity.


Long-term Debt Image 3

Debt capacity

Ability to borrow. The amount a firm can borrow up to the point where the firm value no
longer increases.


Debt Capacity

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.


Debt displacement

The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
forced to cut back on borrowing.


Debt/equity ratio

Indicator of financial leverage. Compares assets provided by creditors to assets provided
by shareholders. Determined by dividing long-term debt by common stockholder equity.


Debt/Equity Ratio

A comparison of debt to equity in a company's capital structure.


Debt Financing

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.


Debt instrument

An asset requiring fixed dollar payments, such as a government or corporate bond.


Debt Instrument

Any financial asset corresponding to a debt, such as a bond or a treasury bill.


Debt leverage

The amplification of the return earned on equity when an investment or firm is financed
partially with borrowed money.


Debt limitation

A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.


Long-term Debt Image 4

Debt market

The market for trading debt instruments.



Debt ratio

Total debt divided by total assets.


Debt Ratio

The percentage of debt that is used in the total capitalization of a
company. It is calculated by dividing the total book value of the
debt by the book value of all assets.


Debt relief

Reducing the principal and/or interest payments on LDC loans.


Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.


Debt Security

A security representing a debt relationship with an enterprise, including a government
security, municipal security, corporate bond, convertible debt issue, and commercial
paper.


Debt service

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
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.


Debt service parity approach

An analysis wherein the alternatives under consideration will provide the firm
with the exact same schedule of after-tax debt payments (including both interest and principal).


Debt swap

A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local
equity.


debt-to-equity ratio

A widely used financial statement ratio to assess the
overall debt load of a business and its capital structure, it equals total liabilities
divided by total owners’ equity. Both numbers for this ratio are
taken from a business’s latest balance sheet. There is no standard, or
generally agreed on, maximum ratio, such as 1:1 or 2:1. Every industry
is different in this regard. Some businesses, such as financial institutions,
have very high debt-to-equity ratios. In contrast, many businesses
use very little debt relative to their owners’ equity.


Debtor in possession

A firm that is continuing to operate under Chapter 11 bankruptcy process.


Debtor-in-possession financing

New debt obtained by a firm during the Chapter 11 bankruptcy process.


Debtors

Sales to customers who have bought goods or services on credit but who have not yet paid their debt.


Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models


Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.


Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.


financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.


Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.


Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.


Firm's net value of debt

Total firm value minus total firm debt.


Flexible Term

Optional periods of time which the conditions of a contract will be carried out.


Funded debt

debt maturing after more than one year.


funded debt

debt with more than 1 year remaining to maturity.


Interest rate on debt

The firm's cost of debt capital.


Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.


Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.


Intermediary

An independent third party that may act as a mediator during negotiations.


Intermediate Good

A good used in producing another good.


Intermediate-term

Typically 1-10 years.


Intermediation

Investment through a financial institution. Related: disintermediation.


Junior debt (subordinate debt)

debt whose holders have a claim on the firm's assets only after senior
debtholder's claims have been satisfied. Subordinated debt.


Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a
liquidity premium.


Long

One who has bought a contract(s) to establish a market position and who has not yet closed out this
position through an offsetting sale; the opposite of short.


Long bonds

Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.


Long bonds

Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.


Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.


Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.


Long hedge

The purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used
by processors or exporters as protection against an advance in the cash price. Related: Hedge, short hedge


Long position

An options position where a person has executed one or more option trades where the net
result is that they are an "owner" or holder of options (i. e. the number of contracts bought exceeds the
number of contracts sold).
Occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "long the stock."
Related: Short position


Long position

Outright ownership of a security or financial instrument. The
owner expects the price to rise in order to make a profit on some future sale.


long position

Purchase of an investment.


Long rate

The yield on a zero-coupon Treasury bond.


Long run

A period of time in which all costs are variable; greater than one year.
long straddle A straddle in which a long position is taken in both a put and call option.


Long run

A period of time in which all costs are variable; greater than one year.


Long straddle

A straddle in which a long position is taken in both a put and call option.


Long-term

In accounting information, one year or greater.


Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.


Long-term financial plan

Financial plan covering two or more years of future operations.


Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.


LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.


Long-term liabilities

Amounts owing after more than one year.


Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.


Mezzanine Debt

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.


National Debt

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.


Original issue discount debt (OID debt)

debt that is initially offered at a price below par.


Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.


predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate


Public Debt

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:
(Total liabilities) / (Stockholders’ equity)


Repayment Terms

The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.


Secured debt

debt that, in the event of default, has first claim on specified assets.


secured debt

debt that has first claim on specified collateral in the event of default.


Senior debt

debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.


Senior Debt

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.


Short-term financial plan

A financial plan that covers the coming fiscal year.


Short-term investment services

Services that assist firms in making short-term investments.



 

 

 

 

 

 

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