ACC 210 Study Guide - Midterm Guide: Effective Interest Rate, Contingent Liability, Dividend

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Working capital = current assets - current liabilities. Debt to assets ratio = total liabilities/total assets. Times interest earned ratio = (net income +income tax exp. Capital structure is the mixture of liabilities and se used by a business. Interest expense on debt is tax deductible. Taxable income is less than it is without the interest on the debt. Fixed amount of compensation to the lender. Can plan for the cash flow needs for interest expense & debt retirement. In periods of inflation, debt permits borrowers to repay the lender in dollars that have declined in purchasing power! Creditors do not share in profits of the company & cannot vote . Non-installment notes (interest only until note becomes due) Installment notes (each payment includes interest and principal) The amount of money borrower agrees to repay at maturity. Date on which the borrower agrees to pay the creditor the face value (par value, principal)

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