Non Current Liability

Non current liabilities
Long circumstance debt
A corporation`s structure capital letter structure is mix of debt and owner`s impartiality which is used to finance the acquisition of the loyal`s assets.
In many nonfinancial blind drunks, long term debt accounts nearly placed up to half of the firm`s capital structure.
Advantage - rice beer expense is deductible in calculating taxable income, whereas dividends (distributions of earning to stockholders) are not tax deductible.
Example, assume a firm has an average tax regularise of 30 portion and issues long term debt with an interest rate of 10 percent. The firm`s after tax cost of debt is only 7 percent, which is probably less than the return sought by stockholders.
pecuniary leverage is the difference between the rate of return clear on assets (ROI) and the rate of return earned on owners` equity (ROE). (Positive & negative)
If the firm can borrow notes at interest cost of 10 percent and use money to buy assets on which it earns a return greater than 10 percent, the owners will have a greater return on their equity (ROE) than if they provided all of the funds themselves.
In short, financial leverage is relates to the use of borrowed money to enhance the return to owners.




If a firm earns a lower return on investment than the interest rate on borrowed funds, financial leverage will be negative and ROE will be less than ROI and current this will adds risk to the firm. This is because the firm does not earn bountiful to pay the interest on its debt, thus the debt holders can in the long run force the firm into bankruptcy.
Whether financial leverage is good or bad for the stockholders depends on the relationship between ROI and the interest rate on long term debt.
Most long term debt is issued in the form of bond. Bond payable is a egg document and usually issued in denominations of $1000.
Face amount is the principal(prenominal) of amount printed on the face of the bond.
Bond prices, when the bonds are issued and bought and change in the market.
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