FINANCIAL MANAGEMENT by Timbang
Open-end mortgage bond not commonly accepted by
DEFINITION OF TERMS
1. Bond long term debt in wc the corporation that issued the bonds
owes the bondholders a debt and is obliged to repay the principal at
its face value on the maturity date or to make periodic interest
payments until the principal is paid.
2. Nominal Rate (principal or face amount of the bond issue) the
agreement the nominal rate to be used when computing the
interest and principal to be paid on date.
3. Maturity date the date on wc the issuer has to repay the nominal
amount.
4. Conversion provision issuing corporation provides investing option
of converting the bonds purchased into other forms of security such
as preferred stock.
5. Bond certificate certificate given when bonds are issued.
6. Income bond also an unsecured bond; bondholders receive
investments only if the firm has sufficient income; rarely used by
firms
7. Guaranteed bond made when a company or individual accepts the
obligation to pay the interest and principal in case of default.
8. Serial bond bonds in wc the principal amount matures in a series
of payments rather than a single payment.
9. Coupon bond (bearer bond) bonds where a sheet of coupon is
attached to the bond certificate.
10. Junk bond high risk, high yield bonds issued by companies that
have numerous outstanding obligations or that are in a weak
financial condition.
11. Collateral trust bond many firms, as part of their investment, own
stocks and bonds of other corporations; the investment securities
owned by a firm can be used as a collateral of the issuing firm.
12. Straight bond same as term bond
13. Floating rate bond type of bond where the interest payment
changes due to the fluctuations in the interest rate.
14. Registered bond requires that the name of the bondholders be
registered in the books of the corporation.
15. Secured bond bonds with fixed assets pledged as collateral.
16.
bondholders because it treats the claims of the second mortgage
and the first mortgage equally.
17. Unsecured bond bonds issued without collateral; example is
debenture bond.
18. Convertible bond can exchange the bond for a predetermined
number of shares of a corporate stock.
19. Callable bonds bonds wc may be called for redemption prior to the
maturity date.
20. Term bond bonds that mature on a single date; usually require
that firms establish a sinking fund so that upon maturity, they will
not encounter any difficulty in paying-off the maturing obligation.
21. Interest bearing bond earns on specific intervals, normally a
period of 6 months.
22. Non-interest bearing bond bond that bears no interest but is sold
at a very big discount.
23. Subordinated bond another example of a debenture; claims under
this type are inferior to the claims of the other creditors
enumerated in the bond indenture.
24. Call provision provides the issuer of the bonds with the right to
redeem the before the maturity date, thus enabling the corporation
to pay off the bonds due.
25. Covenants part of bond indentures that restricts certain actions of
the issuer.
2 types of covenants
1. Protective covenants state the actions or conditions wc a
company should do.
2. Negative covenants state the actions or conditions wc a
company should not do.
26. Mortgages obligations granted by banks or other financial
institutions to the borrower that estate or immovable assets as
collateral.
27. Ex-rights
28. Yield to call
29. Weighted average cost of capital
30. Unappropriated Retained Earnings
31. Issue price price with wc investors can buy the bonds when they 56. Stock exchange market organized for the trading of shares and
are first net proceeds the issuer receives are computed as the issue where investors can buy shares of a wide range of companies.
price less the issuance fees. 57. Market price
32. Valuation of bonds 58. Retained earnings represent the cumulative balance of the
33. Common stock periodic earnings, distributions, fundamental errors and other
34. Bond indenture terms and conditions in a bond issuance; features capital adjustments.
of the bond issuance; sometimes called a deed of trust. 59. Yield to maturity
35. Bond refunding also known as bond refinancing; refers to issuance 60. Current yield
of new bonds to pay off outstanding bonds. 61. Capital Asset Pricing model
36. Underwriter financial institution designated by the issuing 62. Beta
company to facilitate the sale of the shares of stock based on a
predetermine agreement.
37. Subscribed capital stock represents the portion of the authorized
capital stock which have been subscribed but are not yet fully paid.
38. Rights-on
39. Coupon rate
40. Secured debentures particular assets are attached to it
41. Unsecured debentures bonds that do not have any specific
security attached to them
42. Par value the stated value, as specified in the certificate of stock
and in the articles of incorporation.
43. Capital stock represents the amount paid by the stockholders
whether in cash, property, or services rendered.
44. Additional Paid in Capital the portion of the paid in capital which
exceeds the par value.
45. Stock right
46. Variable growth rate
47. Appropriated retained earnings
48. Preferred stock
49. Required rate of return
50. Treasury stock the corporations own stock that has been issued
and reacquired or cancelled. These are held for possible resale,
stock option plan.
51. Bond premium bonds sold above face value
52. Discount bonds sold below its face value
53. Cost of capital
54. Long-term debt obligations that mature in 2-20 years.
55. Sinking fund provision provision wc requires the issuing
corporation to set aside an amount to pay off the bond issuances.