Obtain the Financial Statements of a Company and Ask the Students

question 7

Short Answer

Obtain the financial statements of a company and ask the students to compute the:
a. Long-term debt to assets ratio
b. Interest coverage ratio
c. Debt service coverage ratio

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Definitions:

Face Rate

The interest rate stated on the face of a bond or a loan document, which determines the interest payments that the issuer will make.

Contract Rate

This refers to the interest rate stated in a contract that determines the amount of interest owed on a loan or financial agreement.

Stated Rate

The interest rate expressed in the terms of a loan or investment agreement, not necessarily reflecting the actual yield.

Effective Rate

The effective rate is the actual interest rate on a loan or financial product, taking into account the compounding of interest, as opposed to the nominal rate.