When Debt Is Used to Finance Purchase of Assets,the Term

question 116

True/False

When debt is used to finance purchase of assets,the term or time span of the debt should be similar to the lifespan of the assets.

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Definitions:

Principal Balance

The original sum of money borrowed in a loan or the remaining balance of a loan excluding interest.

Times Interest Earned

A ratio that measures a company's ability to meet its debt obligations based on its earnings before interest and taxes.

Net Income

The amount of money a company ultimately earns once it subtracts expenses and taxes from its gross revenue.

Interest Expense

Interest expense is the cost incurred by an entity for borrowed funds.