The business owners (shareholders) demand a higher rate of return than what is represented
by the interest payments on the company debt.
Debit interest expense by the difference of the interest payment and the premium amortization, credit
cash by the interest payment amount and debit premium on bonds payable by the amortization amount.
Debit interest expense by the sum of the interest payment and the discount amortization, credit cash
by the interest payment amount and credit discount on bonds payable by the amortization amount.
With drillers
burdened by interest payments on $ 235 billion of debt, $ 89 billion of it high - yield, a U.S. regulator has warned banks to beware of the «emerging risk» of lending to energy companies.
If LIBOR rises to 7 %
by the interest payment date and the investor is paying quarterly interest on a principle amount of $ 1,000,000, then the caplet will pay off $ 2,500.
I also look at the interest coverage ratio (earnings
divided by interest payments) but this has a weakness in that today's low interest rates make the numbers look better than they would be in a more «normal» interest rate environment.
I scale gross profits by book assets, not book equity, because gross profits are not
reduced by interest payments and are thus independent of leverage.
More than 90 percent of the revenues were accounted for by dividends and less than 10 percent
by interest payments.
Around 60 percent of the revenues were accounted for by dividends and 40 percent
by interest payments.
Up to now, around 62 percent of the revenues were accounted for by dividends and 38 percent
by interest payments.