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bonds

Debt instruments that larger companies sell to raise longterm funds.


capital budgeting
The process of analyzing the needs of a business and
selecting the assets that will maximize its value.
commercial certificates of deposit (CDs)
CDs issued by commercial banks and brokerage companies,
available in minimum amounts of $100,000, which may be
traded prior to maturity.
commercial paper
A written promise from one company to another to pay a
specific amount of money.
dividend yield
The dividend per share divided by the stock price.
eurodollar market
A market for trading U.S. dollars in foreign countries.
factor
A finance company to which businesses sell their accounts
receivable, usually for a percentage of the total face value.
floating-rate bonds
Bonds with interest rates that change with current interest
rates otherwise available in the economy.
investment banking
The sale of stocks and bonds for corporations.
junk bonds
A special type of higher-interest-rate bond that carries
higher inherent risks.
line of credit
An arrangement by which a bank agrees to lend a specified
amount of money to the organization upon request.
lockbox

An address, often a commercial bank, at which a company


receives payments in order to speed collections from
customers.
long-term (fixed) assets
Production facilities, offices, and equipmentall of which
are expected to last for many years.
long-term liabilities
Debts that will be repaid over a number of years, such as
long-term loans and bond issues.
marketable securities
Temporary investments of extra cash by organizations for
up to one year: U. S. Treasury bills, certificates of deposit,
commercial paper, or Eurodollar loans.
over-the-counter (OTC) market
A network of dealers all over the country linked by
computers, telephones, and teletype machines.
primary market
The market where firms raise financial capital.
prime rate
The interest rate that commercial banks charge their best
customers for short-term loans.
retained earnings
Earnings after expenses and taxes that are reinvested in the
assets of the firm and belong to the owners in the form of
equity.
secondary markets
Stock exchanges and over-the-counter markets where
investors can trade their securities with other investors
rather than the company that issued the stock or bond.
secured bonds
Bonds that are backed by specific collateral that must be
forfeited in the event that the issuing firm defaults.
secured loans

Loans backed by collateral that the bank can claim if


borrowers fail to repay them.
securities markets
The mechanism for buying and selling securities.
serial bonds
A sequence of small bond issues of progressively longer
maturity.
trade credit
Credit extended by suppliers for the purchase of their goods
and services.
transaction balances
Cash kept on hand by a firm to pay bills such as employee
wages, supplies, and utilities.
Treasury bills (T-bills)
Short-term debt obligations the U. S. government sells to
raise money.
unsecured bonds
Bonds that are not backed by specific collateral; also called
debentures.
unsecured loans
Loans backed only by the borrower's good reputation and
previous credit rating.
working capital management
The management of short-term (current) assets and
liabilities.