Stockholders' Equity: Classes of Capital Stock

Learning objectives

After studying this chapter, you should be able to:

Describe the features of bonds and tell how bonds differ from shares of stock
List the advantages and disadvantages of financing with long-term debt and prepare examples showing how to employ financial leverage.
Prepare journal entries for bonds issued at face value.
Explain how interest rates affect bond prices and what causes a bond to sell at a premium or a discount.
Apply the concept of present value to compute the price of a bond.
Prepare journal entries for bonds issued at a discount or a premium.
Prepare journal entries for bond redemptions and bond conversions.
Describe the ratings used for bonds.
Analyze and use the financial results – times interest earned ratio.
Explain future value and present value concepts and make required calculations (Appendix).