Cost of Debt
Cost of debt is the interest a company pays on its borrowings. It is expressed as a percentage rate. In addition, cost of debt can be calculated as a before-tax rate or an after-tax rate. Because interest is deductible for income taxes, the cost of debt is usually expressed as an after-tax rate.
The formula for the cost of debt is the sum of the risk-free rate plus the credit spread times one minus the tax rate (Rf + Credit Spread)*(1 - Tax Rate).
The effective annual interest rate is a way of restating the annual interest rate so that it takes into account the effects of compounding.
Float is money in the banking system that is briefly counted twice due to delays in processing checks.
A quarter, often abbreviated “Q,” is a consecutive three-month period that a company uses to report its earnings and dividends.
How do governmental and business budget deficits function?
A customer information file is a collection of data about a bank or credit union patron.
A sinking fund is a way for companies to pay off part of their bond issue before it reaches maturity. By eliminating its debt gradually, the bond issuer is more likely to attract investors concerned about default risk.
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