Bond certificate Evidence of an organization’s debt to a bondholder.

Bond indenture "A supplementary agreement to a bond issue that defines the rights, privileges, and limitations of bondholders."

Bond issue The total value of bonds issued at one time.






Callable bonds Bonds that an organization can buy back and retire at a call price before maturity.

Call price "A specified price, usually above face value, at which a corporation may buy back and retire bonds before maturity."

Capital lease A long-term lease in which the risk of ownership lies with the lessee and whose terms resemble those of a purchase or sale on installment.

Convertible bonds Bonds that can be exchanged for common stock or other securities of the corporation.

Coupon bonds Bonds that are usually not registered with the issuing organization but instead bear interest coupons stating the amount of interest due and the payment date.






Discount "The amount by which the face value of a bond exceeds the issue price, which occurs when the market interest rate is higher than the face interest rate."






Early extinguishment of debt The retirement of a bond issue before its maturity date.

Effective interest method A method of amortizing bond discounts or premiums that applies a constant interest rate (the market rate at the time the bonds were issued) to the carrying value of the bonds at the beginning of each interest period.






Face interest rate The rate of interest paid to bondholders based on the face value of the bonds.

Financial leverage The ability to increase earnings for stockholders by earning more on assets than is paid in interest on debt incurred to finance the assets. Also called trading on the equity.






Interest coverage ratio A measure of the degree of protection a company has from default on interest payments; income before taxes plus interest expense divided by interest expense.






Market interest rate The rate of interest paid in the market on bonds of similar risk. Also called effective interest rate.

Mortgage A long-term debt secured by real property.






Operating lease A short-term lease in which the risks of ownership remain with the lessor and whose payments are recorded as rent expense.

Other postretirement benefits Health care and other nonpension benefits paid to a worker after retirement but earned while the employee is still working.






Pension fund "A fund established through contributions by an employer, and often by employees, from which payments are made to employees after retirement or on disability or death."

Pension plan A contract between a company and its employees under which the company agrees to pay benefits to the employees after they retire.

Premium "The amount by which the issue price of a bond exceeds its face value, which occurs when the market interest rate is lower than the face interest rate."






Registered bonds Bonds for which the names and addresses of bondholders are recorded with the issuing organization.






Secured bonds Bonds that give the bondholders a pledge of certain assets as a guarantee of repayment.

Serial bonds Bonds in an issue that mature on different dates.

Straight-line method A method of amortizing bond discounts or premiums that allocates the discount or premium equally over each interest period of the life of a bond.






Term bonds Bonds in an issue that mature at the same time.






Unsecured bonds Bonds issued on the general credit of an organization. Also called debenture bonds.