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).

Source: Textbook Equity,
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