Chapter 18

The interest rate charged to a bank’s most creditworthy customers.

• Prime Interest Rate

• Bond

• Stated Interest Rate

• Debt Financing

A long-term promise to pay a specified amount on a specified date and to pay interest at stated intervals.

• Prime Interest Rate

• Bond

• Stated Interest Rate

• Debt Financing

The interest rate used to calculate periodic interest payments on a bond.

• Prime Interest Rate

• Bond

• Stated Interest Rate

• Debt Financing

Obtaining capital by borrowing money for a period of time.

• Prime Interest Rate

• Bond

• Stated Interest Rate

• Debt Financing

Obtaining capital by issuing additional stock in a corporation.

• equity financing

• financial leverage

• collateral

• cost of capital

The ability of a business to use borrowed funds to increase its earnings.

• equity financing

• financial leverage

• collateral

• cost of capital

Assets pledged to a creditor to guarantee repayment of a loan.

• equity financing

• financial leverage

• collateral

• cost of capital

The ratio of interest and dividend payments to the proceeds from debt and capital financing.

• equity financing

• financial leverage

• collateral

• cost of capital

The payment of an operating expense necessary to earn revenue.

• revenue expenditure

• issue date

• non-operating expenses

• line of credit

The date on which a business issues a note, bond, or stock.

• revenue expenditure

• issue date

• non-operating expenses

• line of credit