| A | B |
|---|
| Annuity | Series of equal payments at equal intervals. |
| Bearer Bonds | Bonds made payable to whoever holds them (the bearer); also called unregistered bonds. |
| Bond | Written promise to pay the bond's par (or face) value and interest at a stated contract rate; often issued in denominations of $1,000. |
| Bond Certificate | Document containing bond specifics such as issuer's name, bond par value, contract interest rate, and maturity date. |
| Bond Indenture | Contract between the bond issuer and the bondholders; identifies the parties' rights and obligations. |
| Callable Bonds | Bonds that give the issuer the option to retire them at a stated amount prior to maturity. |
| Capital Leases | Long-term leases in which the lessor transfers substantially all risk and rewards of ownership to the lessee. |
| Carrying Value of Bonds | Net amount at which bonds are reported on the balance sheet; equals the par value of the bonds less any unamortized discount or plus any unamortized premium; also called carrying amount or book value. |
| Contract Rate | Interest rate specified in a bond indenture (or note); multiplied by the par value to determine the interest paid each period; also called coupon rate, stated rate, or nominal rate. |
| Convertible Bonds | Bonds that bondholders can exchange for a set number of the issuer's shares. |
| Coupon Bonds | Bonds with interest coupons attached to their certificates; bondholders detach coupons when they mature and present them to a bank or broker for collection. |
| Discount on Bonds Payable | Difference between a bond's par value and its lower issue price or carrying value; occurs when the contract rate is less than the market rate. |
| Effective Interest Method | Allocates interest expense over the bond life to yield a constant rate of interest; interest expense for a period is found by multiplying the balance of the liability at the beginning of the period by the bond market rate at issuance; also called interest method. |
| Installment Note | Liability requiring a series of periodic payments to the lender. |
| Lease | Contract specifying the rental of property. |
| Market Rate | Interest rate borrowers are willing to pay and lenders are willing to accept for a specific debt agreement given its risk level. |
| Mortgage | Legal loan agreement that protects a lender by giving the lender the right to be paid from the cash proceeds from the sale of a borrower's assets identified in the mortgage. |
| Off-Balance-Sheet Financing | Acquisition of assets by agreeing to liabilities not reported on the balance sheet. |
| Operating Leases | Short-term (or cancelable) leases in which the lessor retains risks and rewards of ownership. |
| Par Value of a Bond | Amount the bond issuer agrees to pay at maturity and the amount on which cash interest payments are based; also called face amount or face value. |
| Pension Plan | Contractual agreement between an employer and its employees for the employer to provide benefits to employees after they retire; expensed when incurred. |
| Pledged Assets to Secured Liabilities | Ratio of the book value of a company's pledged assets to the book value of its secured liabilities. |
| Premium on Bonds | Difference between a bond's par value and its higher carrying value; occurs when the contract rate is higher than the market rate; also called bond premium. |
| Registered Bonds | Bonds owned by investors whose names and addresses are recorded by the issuer; interest payments are made to the registered owners. |
| Secured Bonds | Bonds that have specific assets of the issuer pledged as collateral. |
| Serial Bonds | Bonds consisting of separate amounts that mature at different dates. |
| Sinking Fund Bonds | Bonds that require the issuer to make deposits to a separate account; bondholders are repaid at maturity from that account. |
| Straight-Line Method | Method allocating an equal amount of bond interest expense to each period in the life of bonds. |
| Term Bonds | Bonds scheduled for payment (maturity) at a single specified date. |
| Unsecured Bonds | Bonds backed only by the issuer's credit standing; almost always riskier than secured bonds; also called debentures. |
