BUS 251 Chapter Notes - Chapter 10: Finance Lease, Operating Lease, Private Placement
9 Apr 2016
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May be unrecorded such as contractual commitments or possible outcomes of liigaion proceedings. May have signiicant impact on future operaing results. Most common: long term loans, bonds, lease, pension & ei and future income taxes. Long term liabiliies from transacion with lenders: mortgages & bonds. Company and lender enter into a inancial agreement that speciies term of loans. Mortgage: long term debt with land, building or equipment pledged as collateral. Most long term loans are installment loans: repayments paid periodically. Blended payments: consist of both interest and principle components. Loan amorizaion table is prepared showing allocaion of interest and principle payments for duraion of loan. Covenants: certain condiions or restricions that borrower must meet during loan period that can be inancial (meet in raios) or non inancial (annual audit, in statements) Bond: a formal agreement between borrower and lender that speciies how borrower is to pay back according to the terms, condiions, and restricions stated in the indenture agreement.
