Debt Service Funds Should Accrue Interest and Report Principle Payments

question 41

True/False

Debt service funds should accrue interest and report principle payments due within the next12 months following year end.

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Definitions:

Equity

The value of an asset after deducting the value of liabilities, representing ownership interest in a company or property.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.

Debt/Equity Ratio

A fiscal ratio that reflects the comparative amount of equity from shareholders and borrowed funds utilized to support a company's resources.

DFL

Degree of Financial Leverage, a ratio that measures the sensitivity of a company’s earnings per share to fluctuations in its operating income, based on its capital structure.