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.