Financial Accounting: In an Economic Context

KEY TERMS

Note: Definitions for these terms are provided in the glossary at the end of the text.

Bonds payable (p. 485)

Call provision (p. 497)

Capital leases (p. 507)

Certificates of deposit (p. 513)

Collateral (p. 489)

Covenants (p. 496)

Debentures (p. 497)

Default (p. 489)

Discount on bonds payable (p. 500)

Discount rate (p. 513)

Effective interest method (p. 492)

Effective interest rate (p. 490)

Face, principal, or maturity value (p. 488)

Hedging (p. 516)

Installment obligation (p. 488)

Interest (p. 488)

Interest-bearing obligations (p. 488)

Interest payment (p. 496)

Interest rate swap (p. 516)

Lease (p. 506)

Leasehold obligations (p. 485)

Life (p. 495)

Maturity date (p. 485)

Mortgage (p. 492)

Non-interest-bearing obligations (p. 488)

Notes payable (p. 485)

Operating leases (p. 506)

Prime interest rate (p. 513)

Proceeds (p. 496)

Redeemed (p. 504)

Refinancing (p. 492)

Restrictive covenants (p. 489)

Risk-free (or riskless) return (p. 513)

Risk premium (p. 513)

Secured notes (p. 492)

Stated interest rate (p. 488)

Treasury notes (p. 513)

Unsecured bonds (p. 497)

Unsecured notes (p. 492)

ETHICS in the Real World

A review of the financial statements of Lowe's and Home Depot shows that both companies lease a large portion of their facilities. A closer examination of the lease arrangements reveals that, while the contractual terms of the leases held by the two companies are quite similar, Lowe's considers 10 percent of its leases as capital leases compared to 13 percent for Home Depot. ...