Accounting Tools

DECEMBER 20, 2023

What is Default Risk? Default risk is the possibility that the issuer of a bond will not be able to repay the underlying principal or make scheduled interest payments. Entities at highest risk of default typically have a risky capital structure and unreliable cash flows that become more uncertain when economic conditions worsen.

Corporate Finance 40

Corporate Finance Collections 40

Accounting Tools

SEPTEMBER 10, 2023

Related Courses Corporate Cash Management Corporate Finance Treasurer's Guidebook What is a Fixed Rate Loan? A fixed rate loan is a lending arrangement in which the interest rate charged does not change for the life of the loan.

Corporate Finance 40

Corporate Finance 40

Accounting Tools

OCTOBER 4, 2023

Related Courses Corporate Finance Treasurer's Guidebook What is the Prime Rate? The prime rate is the interest rate that a commercial bank charges its best customers. These customers are usually large, stable, and highly creditworthy entities, for which there is a minimal risk of default.

Corporate Finance 40

Corporate Finance 40

Accounting Tools

FEBRUARY 1, 2024

A certificate of deposit is a term bank deposit with a fixed duration and stated interest rate. A certificate of deposit normally pays a fixed interest rate upon maturity, though some variable-rate versions are available. What is a Certificate of Deposit? A CD is essentially a promissory note issued by a bank.

Deposits 40

Deposits Corporate Finance 40

Accounting Tools

JULY 29, 2023

Related Courses Corporate Cash Management Corporate Finance Treasurer's Guidebook Working Capital Management The treasurer position is responsible for corporate liquidity , investments, and risk management related to the company's financial activities.

Corporate Finance 75

Corporate Finance Accounting Accounting 75

Accounting Tools

SEPTEMBER 22, 2023

Related Courses Corporate Cash Management Corporate Finance Treasurer's Guidebook What is a Variable Rate Loan? A variable rate loan is a lending arrangement under which the interest rate varies in accordance with changes in a standard rate. Treasury securities.

Corporate Finance 40

Corporate Finance 40

Accounting Tools

OCTOBER 7, 2023

Related Courses Corporate Cash Management Corporate Finance What is a Variable Interest Rate? A variable interest rate is an interest rate that changes over time, typically in relation to an underlying benchmark, such as the prime rate.

Corporate Finance 40

Corporate Finance 40

Accounting Tools

FEBRUARY 1, 2024

What is a Credit Rating? A credit rating is a standard score assigned to an entity or its securities by a credit rating agency , based on a review of its financial condition. The credit rating agencies all have different scoring systems, but the highest score generally given is AAA, and the lowest score is either C or D.

Collections 40

Collections 40

Accounting Tools

JANUARY 24, 2024

One reason for the deep discount is that the stated interest rate on the bond is well below the current market rate. Another possible reason is that the issuer has quite a low credit rating , so that investors demand a high effective interest rate in order to hold the issuer’s bonds.

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Accounting Tools

SEPTEMBER 20, 2023

The issuer uses a call feature to hedge against interest rate risk ; bonds can be bought back and replaced by bonds carrying a lower interest rate if interest rates decline. Related Articles Call Premium Call Price Call Provision

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Accounting Tools

SEPTEMBER 4, 2023

Related Courses Corporate Cash Management Enterprise Risk Management Treasurer's Guidebook What is an Interest Rate Swap? An interest rate swap is a customized contract between two parties to swap two schedules of cash flows. The counterparties are usually a company and a bank.

40

40

Accounting Tools

DECEMBER 28, 2023

When the ratio is comparatively high, it implies that a business is at greater risk of bankruptcy , since it may not be able to pay for the interest expense on the debt if its cash flows decline. The long-term debt to equity ratio is a method used to determine the leverage that a business has taken on.

Financial Statements 75

Financial Statements 75

Accounting Tools

JUNE 20, 2023

In this case, the existence of a recourse feature may not provide complete risk mitigation for the lender. A lender may be more willing to grant credit under a recourse loan at a lower interest rate than would be the case with a non-recourse loan, since the lender's risk of repayment is reduced under a non-recourse situation.

Corporate Finance 75

Corporate Finance Tax Accounting Accounting 75

Accounting Tools

JANUARY 30, 2024

One currency is bought at the spot rate and date, while the transaction is reversed at the forward date and rate. There is an interest rate differential over the period of the swap, which is paid between the two parties. In addition, a currency swap can be used to hedge a company’s exposure to exchange rate risk.

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Accounting Tools

JULY 20, 2023

Related Courses Corporate Cash Management Corporate Finance Treasurer's Guidebook What is a Variable Rate Bond? A variable rate bond is a bond whose stated interest rate varies as a percentage of a baseline indicator, such as the prime rate.

Corporate Finance 40

Corporate Finance 40

Accounting Tools

APRIL 28, 2024

The existence of a sinking fund also reduces the risk for investors , who have an improved chance of being repaid when the associated debt becomes due. Also, when a sinking fund is a required part of an investing agreement, investors are more likely to allow a reduced rate of interest on the associated debt or preferred stock.

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Accounting Tools

OCTOBER 25, 2023

A flat yield curve is most likely during economic transition periods, when investors are uncertain about whether rates will rise or fall. Economists typically review the difference between the interest rate on the 10-year Treasury note and the Fed funds rate, which is known as the interest rate spread.

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40

Accounting Tools

SEPTEMBER 4, 2023

Related Courses Accounting for Derivatives and Hedges Enterprise Risk Management Treasurer's Guidebook What is a Currency Swap? Advantages of Currency Swaps A currency swap is a risk management technique that offsets the risk of exchange rate fluctuations. Related Articles Interest Rate Swaps Swaptions

Accounts Receivable 40

Accounts Receivable Accounts Receivable Account Receivables Accounting 40

Accounting Tools

JANUARY 19, 2024

Instead, investors rely upon the general creditworthiness and reputation of the issuing entity to obtain a return of their investment plus interest income. An entity that issues debentures and has lower credit quality can expect to pay a high interest rate, to compensate investors for the increased risk associated with these instruments.

Corporate Finance 40

Corporate Finance Billing Tax 40

Accounting Tools

MARCH 7, 2024

When constructing an expected present value of future cash flows , one should use a credit-adjusted risk-free rate to discount cash flows to their present value. Thus, the credit standing of a business may impact the discount rate used. Determine the credit-adjusted risk-free rate.

Financial Statements 40

Financial Statements Accounting Accounting 40

Accounting Tools

AUGUST 1, 2023

It also includes the interest rate that applies to the debt, the maturity date , the signature of the maker, and the date signed. This arrangement can be beneficial for the lender , since it may be possible to obtain a higher interest rate than the current market rate. The payee is the holder of a promissory note.

Corporate Finance 40

Corporate Finance Accounting Accounting 40

Counto

MARCH 6, 2024

The majority of small businesses require a minimum score of 75 to access credit with favourable interest rates. Lenders use it to gauge the risk of lending to your business. Risk Evaluation for Lenders: Reduces the perceived risk for lenders, potentially eliminating the need for a personal guarantee.

Payroll 52

Payroll Tax Billing Invoicing 52

Accounting Tools

JANUARY 2, 2024

What is Financial Risk? Financial risk is the potential losses incurred by an investor when investing in a business that uses borrowed money. Related AccountingTools Course Corporate Finance Types of Financial Risk There are several types of financial risk, which include those noted below.

Corporate Finance 40

Corporate Finance Tax 40

Accounting Tools

AUGUST 5, 2023

The WACC tends to decrease as a percentage when a business uses a higher proportion of debt as its source of funding, since the related interest expense is tax deductible , which reduces the cost of this form of funding. However, if too much debt is used, lenders will raise the interest rates charged, which increases the WACC.

Corporate Finance 40

Corporate Finance Budgeting Tax Financial Analysis 40

Accounting Tools

OCTOBER 14, 2023

Given the higher risk of nonpayment, this security pays out a relatively high interest rate , either because it has a high coupon rate or because investors are buying it at a discount. Related Articles Subordinated Debt

Corporate Finance 40

Corporate Finance 40

Accounting Tools

JANUARY 26, 2024

A debt service fund is a cash reserve that is used to pay for the interest and principal payments on certain types of debt. Because of this accountability, it makes the debt offering more attractive to investors, which may reduce the effective interest rate needed to sell the offering. What is a Debt Service Fund?

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

NOVEMBER 6, 2023

Lenders want significant returns on their investments , so any funds loaned are likely to be at a relatively high interest rate. Equity Bridge Financing A business may want to avoid the risk of nonpayment associated with debt, and so secures equity bridge financing instead.

Corporate Finance 40

Corporate Finance Accounts Receivable Accounts Receivable Account Receivables 40

Accounting Tools

SEPTEMBER 21, 2023

This arrangement presents a high risk of default , especially if the cash flows of the acquiree are insufficient to make ongoing debt repayments. When bonds are issued to finance a leveraged buyout, their high risk of nonpayment means that they may be assigned a junk bond rating, and so will have a high effective interest rate.

CPA 40

CPA Tax 40

Accounting Tools

FEBRUARY 15, 2024

However, the obligation to pay interest is a risk that could cause financial difficulties if the issuer falls on hard times. The interest deduction can make the effective cost of debt quite low, if a company can issue bonds at a sufficiently low interest rate. This allows the company to lower its financing cost.

Corporate Finance 40

Corporate Finance Tax Accounting Accounting 40

Accounting Tools

JANUARY 24, 2024

This is a common creditor classification for large and well-funded public companies, where the risk of default is near zero. These creditors may have accepted a lower interest rate on the funds loaned to the borrower, because they have a higher likelihood of payment. Senior creditor.

Accounts Payable 40

Accounts Payable Accounts Payable Collections Accounting 40

Accounting Tools

JULY 27, 2023

By taking these steps, an organization may be able to increase the amount it can borrow, as well as reduce the interest rate it is charged. For example, a bond issuer might be able to improve the rating on a bond issuance, allowing it to sell the bonds at a somewhat lower interest rate.

Corporate Finance 40

Corporate Finance Collections 40

Accounting Tools

SEPTEMBER 1, 2023

This type of bond typically carries a higher rate of interest than a secured bond, to compensate investors for the increased risk of not having their funds repaid. Debenture bonds are typically issued by large corporations and governments with excellent credit ratings. Who Issues Debenture Bonds?

Corporate Finance 40

Corporate Finance 40

Accounting Tools

APRIL 15, 2024

Hedges are used to reduce the risk of losses by taking on an offsetting position in relation to a financial instrument. This accounting applies to anything being hedged, such as foreign exchange positions, cash flows , and interest rates. Related Article Hedging Instrument

Accounting 40

Accounting Accounting 40

Accounting Tools

JUNE 7, 2023

To derive the cost of debt, multiply the interest expense associated with the debt by the inverse of the tax rate percentage, and divide the result by the amount of debt outstanding. The risk-free rate of return is derived from the return on a U.S. Its incremental tax rate is 34%. government security.

Financial Analysis 40

Financial Analysis Corporate Finance Tax 40

Accounting Tools

OCTOBER 14, 2023

If the borrower does not have the financial resources to pay off its debt holders, the holder of subordinated debt is at a heightened risk of not being paid. This type of debt is usually issued by larger corporations that are considered to be financially secure, with high credit ratings. Related Articles Junior Debt

Corporate Finance 40

Corporate Finance 40

Accounting Tools

AUGUST 7, 2023

The two primary criteria for classification as a cash equivalent are that an asset be readily convertible into a known amount of cash, and that it be so near its maturity date that there is an insignificant risk of changes in value due to changes in interest rates by the time the maturity date arrives.

Petty cash 75

Petty cash Billing Auditing Accounting 75

Accounting Tools

SEPTEMBER 25, 2023

Advantages of Convertible Debt Convertible debt benefits the issuer, because investors will accept a lower interest rate in exchange for the conversion feature. Related Articles Credit Facility Debt Security Income Bond Line of Credit Self-Liquidating Loan Short Term Sources of Funds

Corporate Finance 40

Corporate Finance 40