Acquiring Capital for Growth and Development

business having a high level of debt is said to be highly leveraged

interest rates are often based on the prime interest rate

corporation usually sells its bonds directly to individual investors on a public exchange

advantage of selling stock is that the additional capital becomes permanent capital

disadvantage of selling stock is that the ownership is spread over more shares and owners

expenses that are not related to a business's normal operations

The payment of an operating expense necessary to earn revenue.

unpaid dividends on preferred stock may have to be paid before common stockholders

interest incurred on borrowed funds

Obtaining capital by borrowing money for a period of time

debt financing is often extended for a term similar to the useful life of the assets purchased

a class of stock that gives the shareholders preference over other stock options

preferred stock is typically described by referring to the stock's dividend rate and par value

A bank loan agreement that provides immediate short-term access a cash

a business that is unable to pay its account when due may be asked to sign a promissory note

Bonds generally have extended terms such as 5, 10, or 20 years

a line of credit does not have to be repaid as long as the business pays its monthly interest

disadvantage of selling stock is that dividends must be paid to stockholders

face value is the amount to be repaid at the end of the bond term

assets pledged to a creditor to guarantee repayment

The interest rate charged to a bank's most credit worthy customers

a portion of the monthly payment on a note payable reduces the outstanding loan principal