Commercial paper: Borrowing from another company rather than from a bank
Contingencies: Uncertain situations that can result in a gain or a loss for a company.
Contingent liability: An existing uncertain situation that might result in a loss
Current liabilities: Debts that, in most cases, are due within one year. However, when a company has an
operating cycle of longer than a year, its current liabilities are defined by the length of the operating
cycle, rather than by the length of one year.
Current portion of long-term debt: Debt that will be paid within the next year.
Liability: A present responsibility to sacrifice assets in the future due to a transaction or other event that
happened in the past.
Line of credit: An informal agreement that permits a company to borrow up to a prearranged limit
without having to follow formal loan procedures and prepare paperwork.
Notes payable: Written promises to repay amounts borrowed plus interest
Sales tax payable: Sales tax collected from customers by the seller, representing current liabilities
payable to the government.
Unearned revenue: A liability account used to record cash received in advance of the sale or service
Amortization schedule: Provides a summary of the cash interest payments, interest expense, and
changes in carrying value for debt instruments.
Bond: A formal debt instrument that obligates the borrower to repay a stated amount, referred to as
the principal or face amount, at a specified maturity date.
Bond indenture: A contract between a firm issuing bonds and the corporations or individuals who
purchase the bonds.
Callable: A bond feature that allows the borrower to repay the bonds before their scheduled maturity
date at a specified call price.
Capital lease:: Contract in which the lessee essentially buys an asset and borrows the money through a
lease to pay for the asset
Capital structure: The mixture of liabilities and stockholders' equity in a business.
Carrying value: The balance in the bonds payable account, which equals the face value of bonds payable
minus the discount or the face value plus the premium Convertible: A bond feature that allows the lender (or investor) to convert each bond into a specified
number of shares of common stock.
Debt financing: Obtaining additional funding from lenders.
Early extinguishment of debt: The issuer retires debt before its scheduled maturity date
Equity financing: Obtaining additional funding from stockholders.
Installment payment: Includes both an amount that represents interest and an amount that represents
a reduction of the outstanding balance
Lease: A contractual arrangement by which the lessor (owner) provides the lessee (user) the right to use
an asset for a specified period of time.
Market interest rate:: Represents the true interest rate used by investors to value a bond.
Operating lease: Contract in which the lessor owns the asset and the lessee simply uses the asset
Private placement: Sale of debt securities directly to a single investor.
Secured bonds: Bonds that are supported by specific assets pledged as collateral.
Serial bonds: Bonds that require payment of the principal amount of the bond over a series of maturity
Sinking fund: An investment fund used to set aside money to be used to pay debts as they come due
Stated interest rate: The rate quoted in the bond contract used to calculate the cash payments for
Term bonds: Bonds that require payment of the full principal amount of the bond at a single maturity
Unsecured bonds: Bonds that are not supported by specific assets pledged as collateral.
Accumulated deficit: A debit balance in Retained Earnings.
Additional paid-in capital: The portion of the cash proceeds above par value
Angel investors: Wealthy individuals in the business community willing to risk investment funds on a
promising business venture. Articles of incorporation: Describes the nature of the firm's business activities