BUS 200 Chapter Notes - Chapter 15: Unsecured Debt, Revolving Credit, Corporate Bond
Business 200 Chapter 15
four responsibilities of finance
1. determine a firm's long-term investments
2. obtaining funds to pay for those investments
3. conducting the firm's everyday financial activities
4. managing the risks the the firm takes
financial control
the process of checking actual performance against plans to ensure that the desired financial
status is achieved
financial plan
description of how a business will reach some financial position it seeks for the future; includes
projections for resources and uses of funds
unsecured loan
short-term loan in which the borrower is not required to put up collateral
line of credit
a standing agreement between a bank and a firmin which the bank specifies the maximum and
amount it will make available able to the borrower for a short-term unsecured loan; the
borrowercna then draw on those funds, when available
revolving credit agreement
a guaranteed line of credit for which the firm pays the bank interest on funds borrowed, as well
as a fee for extending the line of credit
commercial paper
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a method of short-run fundraising in which a firm sells unsecured notes for less than the face
value and then repurchases them at the face value within 270 days; buyers' profits are the
difference between the original price paid and the face value
debt financing
for long-term expenditure, by borrowing from outside the company; usually takes the form of
long-term loans or the sale of corporate bonds
corporate bond
a promise by the issuing company to pay the holder a certain amount of money on specified
date, with stated interest payments in the interim; a form of long-term debt financing.
Bond indenture
indicates the key terms of a bond, such as the amount, the interest rate, and the maturity date
registered bonds
bonds where the names of holders are registered with the company
bearer/coupon bonds
bonds that require bondholders to clip coupons from certificates and send them to the issuer to
receive interest payments
secured bonds
bonds issued by borrowers who pledge assets as collateral in the event of non-payment
debentures
unsecured bonds
callable bonds
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