Vocab Flashcards
(23 cards)
shares oustanding
the number of shares actually issued
authorized shares
how many shares, in theory, a corporation is allowed to issue (does not result in an accounting transaction)
cumulative
dividend is owed each year, even if they are not paid (determines if dividends are paid in arrears)
dividends in arrears
dividends in previous years that are required to be paid out; becomes an obligation on date of DECLARATION
convertible
shares that can be converted from c/s to p/s
non-callable
cannot be forced to be bought back by company - shareholder can decide
no par value
price of share is to be determined by the market
surplus
when book value is greater than stock repurchase price, there is a surplus
deficit
when book value is less than stock repurchase price, there is a deficit
provisions
there is a present obligation with uncertain timing or amount and an outflow is likely (>50% chance of occurring under IFRS)
contingent
dependent on future event; not probable/measurable / disclosed in notes of fin statements
notes payable
interest-bearing liability with principal due at maturity
mortgages payable
interest-bearing liability with instalment payments
table 1: present value of $1
used to calculate the face value or principal of a bond
table 2: present value of an annuity of $1
used to calculate the present value of all of the future bond interest payments
interest rate
aka implicit borrowing rate, discount rate, cost of capital. ALWAYS the market value rate when present valuing a bond (aka opportunity cost)
face value
aka principal; what the bond issuer must pay the bond holder at the maturity date / ALWAYS $1000 PER BOND IN 2257
coupon rate
stated rate of interest ; always given at an annual rate , always paid semi-annually
market rate
interest rate of comparable companies (the rate all investors demand)
maturity date
when the principal must be paid back to the bondholder in addition to any remaining interest
bond premium
when demand is high for a bond, purchasing the bond should cost more than $1000
occurs when coupon rate > market interest rate
bond discount
when demand is low for a bond, purchasing the bond should cost less than $1000
occurs when coupon rate < market interest rate
effective interest rate method (3 bubble method)
allows us to spread the cost of issuing a bond at a discount, or the benefit of issuing a bond at a premium over the life of the bond
