TYPES OF DEBT

Define the following types of debt instruments:

Amortized Loans
Equal repayments, comprised of both interest and principal, are made throughout the life of
the debt. Same as Installment Loans.
Bonds
Debt with repayment schedules which typically involve only interest until maturity, at which
time the entire principal is also due
Callable Debt
Debt that can be redeemed (paid off) prior to maturity at the option of the issuer under certain
conditions
Commercial Paper
ST unsecured debt (1-270 days) issued by companies to finance ST credit needs
Convertible Debt
Debt that can be exchanged for C/S at the option of the holder or the issuer, depending on
terms
Debentures
Unsecured debt backed only by the integrity of the borrower
Industrial Revenue Bonds
Bonds that typically finance construction of manufacturing or commercial facilities for
private use
Installment Loans
Equal repayments, comprised of both interest and principal, are made throughout the life of
the debt. Same as Amortized Loans.
Interest Only Debt
Only interest is paid throughout the life of the debt. Principal is paid, in full, at maturity.
Leases
Rental payments for the use of an asset not owned by the user
Letters of credit
Document where bank guarantees to pay a seller on behalf of a buyer (the bank’s customer)
Lines of credit
Revolving sources of cash which are not liabilities until drawn
Mortgages
Debt secured by real estate
Municipal Bonds
Bond issued by a government entity
Non-Interest Bearing Debt
All interest and principal is paid at maturity. Same as Pure Discount Debt.
Notes
Debt with repayment schedules that vary, including:
installment (equal payments divided into interest and principal), interest-only,
graduated, lump sum, balloon
Pure Discount Debt
All interest and principal is paid at maturity. Same as Non-Interest Bearing Debt.
Secured Debt
Debt backed by specific assets owned and used as collateral by the borrower
Senior Debt
Debt with priority to liquidation claims
Serial or Installment Bonds
Set of bonds issued at the same time with varying maturity dates
Subordinate Debt
Debt with junior priority to liquidation claims
Unsecured Debt
Debt backed only by integrity of borrower
Zero Coupon Bonds
Bonds that pay no interest until maturity
NOTES RECEIVABLE - FINANCIAL HIGHLIGHTS

FINANCIAL STATEMENT PRESENTATION:

BALANCE SHEET:
ASSETS:
CURRENT ASSETS:
Interest Receivable
Short Term Notes Receivable
Short Term Portion of LT Notes Receivable
or
LONG TERM ASSETS:
Long Term Notes Receivable

INCOME STATEMENT:
OTHER REVENUES AND EXPENSES:
Interest Revenue

STMT OF CASH FLOWS:

OPERATIONS:
Interest collections
INVESTING:
Principal receivable originations and repayments

B/S VALUATION: Present Value

DISCLOSURES:
Segregation of types of receivables, if material
Allowance for Uncollectible Accounts
Amount of receivables pledged or used as collateral
Terms of assignment and factoring arrangements

ANALYSIS:
ST Notes Receivable Included in:
Current Ratio
Quick Ratio
NOTES PAYABLE - FINANCIAL HIGHLIGHTS
FINANCIAL STATEMENT PRESENTATION:
BALANCE SHEET:
LIABILITIES:
CURRENT LIABILITIES:
Interest Payable
Short Term Notes Payable
Short Term Portion of LT Notes Payable
or
LONG TERM LIABILITIES:
Long Term Notes Payable
Mortgage Payable
INCOME STATEMENT:
OTHER REVENUES AND EXPENSES:
Interest Expense
STMT OF CASH FLOWS:
OPERATIONS:
Interest payments
FINANCING:
Principal debt originations and repayments
B/S VALUATION: Present Value
DISCLOSURES:
Types of classes of debt instruments, including:
Letters of credit
Commercial paper
Debentures - no collateral
Revolving credit arrangements
For each major class of debt, include:
Dates of Maturity or Expiration
Interest Rates
Current Principal Balances
Description of significant financing agreements, including:
Unique or specific terms
Required covenants or financial ratio maintenance
Indenture Provisions, including required sinking funds or restricted reserves
Collateral and value of collateral
Fair Market Value of bond instruments
Lines of Credit and available unused portions
Annual principal maturities for each of next 5 years and thereafter
Guarantee of indebtedness of others

ANALYSIS:
Debt to Equity Ratio
Debt Ratio

Times Interest Earned

ST Notes Receivable Included in:
Current Ratio
Quick Ratio
NOTES RECEIVABLE and NOTES PAYABLE - INTEREST BEARING
Assume the following:
Face Value of Note: ??? Note Origination Date: 3/31/x1
FMV of Asset Exchanged: 100,000 Maturity Date: 3/31/x3
Stated Interest Rate: 10% Repayment Installment: ???
Repayment Schedule: semi-annual

COMPUTATIONS:

AMORTIZATION TABLE:

Pmt # Beg O/S Bal Total Pmt Interest Principal End O/S Bal

Origin
3/x1 0 0 0 0 100,000
1
9/x1 100,000 28,201 5,000 23,201 76,799
2 1,920
3/x2 76,799 28,201 3,840 24,361 52,438
3
9/x2 52,438 28,201 2,622 25,579 26,859
4 671
3/x3 26,859 28,201 1,343 26,858 0
Totals
112,804 12,804 100,000
NOTES RECEIVABLE and NOTES PAYABLE - F/S PRESENTATION
YEAR 1 YEAR 2 YEAR 3
INTEREST BEARING NOTE PAYABLE:
B/S
CL
Int Pay 1,920 671
Curr Portion LTD 49,940 26,859
LTD 26,859
I/S
Other Rev & Exp
Int Exp 6,920 5,213 672
CF
Ops
Int Paid (5,000) (6,462) (1,343)
Financing
Loan Origin 100,000
Principal Pmts (23,201) (49,940) (26,858)

INTEREST BEARING NOTE RECEIVABLE:

B/S
CA
Int Rec 1,920 671
Curr Portion LTR 49,940 26,859
LT Rec 26,859
I/S
Other Rev & Exp
Int Rev 6,920 5,213 672
CF
Ops
Int Rec'd 5,000 6,462 1,343
Investing
Loan Origin (100,000)
Principal Rec'd 23,201 49,940 26,858

CONVERSION TO NON-INTEREST BEARING NOTES:

B/S
CL
Curr Portion LTD 51,860 27,530

LTD 26,859
All remaining portions of the financial statements are identical to the interest bearing N/P above.