Defintions
... operate the business, based on the short-term forecast. Debt Capital – Funds raised through various forms of borrowing that must be repaid. Equity Capital – Money raised through the sale of shares in the firm. Trade Credit – The practice of buying goods now, and paying for them in the future. It is the most widely used source of short-tern funding. Meaning that a business is able to buy goods today and pay for them sometime in the future. When a firm buys merchandise, it receives an invoice (bill). Line of Credit – The maximum amount a bank will agree to lend a borrower. Pledging – Using accounts receivable, inventory, or other assets as security for a loan. Secured Loan – A loan backed by collateral, something valuable such as property. If the borrower fails to pay the loan, the lender may take possession of the collateral. Commercial Paper – A short term corporate equivalent of an IOU that is sold in the marketplace by a firm. It matures in 270 days or fewer. Factoring – The process of selling accounts receivables for cash. Bond – A contract of indebtedness issued by a corporation or government unit that promises payment of a principal amount at a specified future time plus annual or semi-annual interest at a specified or variable rate. Maturity Date – It is the date on which a borrower must legally repay the bond principal to the bondholder. Principal – It is the face value of a bond. Stock Exchanges – Markets where the securities of public companies are traded. Unsecured Bonds – Bonds that are not backed by any collateral on the part of the issuing firm. They are also known as debentures or debenture bonds. Convertible Bond – A band that can be converted into shares of common stock in the issuing company. Buying on Margin – Purchasing securities by borrowing some of the cost from your broker, who holds them as collateral security until you pay the balance due. Mutual Fund – A fund that buys a variety of securities and then sells units of owners...