accounting

The dollar value of long-term assets per each dollar of long-term debt. A high ratio suggests that there is a sufficient amount of long-term assets available to pay off long-term debt.

• call premium

• sole proprietorship

• authorized stock

• long-term liabilities

Interest rate (charge for borrowing money) that remains constant over the life of the loan.

• collateral

• fixed interest rate

• issued stock

• partnership

Interest rate that fluctuates (changes) from period to period over the life of the loan.

• restrictive covenants

• variable interest rate

• partnership agreement

• treasury stock

(1) Systematic and periodic allocation of the costs of intangible assets to expense over their useful lives; (2) periodically transferring the discount on a note or a bond to interest expense.

• corporation

• amortization

• outstanding stock

• bond discount

Obligations that require regular payments of principal and interest over the life of the loan.

• effective interest rate

• installment notes

• market value

• articles of incorporation

Pre-approved financing arrangement with a lending institution in which a business can borrow money up to the approved limit by simply writing a check.

• book value per share

• line of credit

• stock certificate

• Discount on Bonds Payable

Debt security used to obtain long-term financing in which a company borrows funds from a number of lenders, called bondholders; usually issued in denominations of $1,000.

• common stock

• bond certificate

• carrying value

• closely held corporation

Party that issues the bond (the borrower).

• straight-line amortization

• issuer (of a bond)

• preferred stock

• Securities Act of 1933

The party buying a bond (the lender or creditor).

• cumulative dividends

• bondholder

• Sarbanes-Oxley Act of 2002

• bond premium

Amount to be paid to the bondholder at bond maturity; base for computing periodic cash interest payments.

• Premium on Bonds Payable

• face value (of bond)

• dividends in arrears

• double taxation