BU397 Lecture Notes - Lecture 2: Promissory Note, Current Liability, Private Placement
Document Summary
Obligations not payable within one year, or one business operating cycle whichever is longer. Any principal due beyond next 12 months = non current liability. Lease liabilities: meet definition of lease capitalization; term goes beyond nxt 12 months. Restrictive covenants: lt debt has more than st debt b/c there"s more risk ratio) way for investor to minimize risk involved. Covenant: promise made by issuer (e. g. promise of maintaining debt to equity. A bond indenture is a promise (by the lender to the borrower) to pay: A sum of money at the designated date, and. Periodic interest (usually paid semi-annually) at a stipulated rate on the face value. Valuation of bond is calculated by determining future cash flows. Require repayment of principal at a future date. The difference is that notes do not normally trade on public markets. Accounting for bonds and notes is the same in many respects.
