Finance / July 18, 2018 / Emmalynn Leach
Daily compounding interest refers to when an account adds the interest accrued at the end of each day to the account balance so that it can earn additional interest the next day and even more the next day, and so on. To calculate daily compounding interest, divide the annual interest rate by 365 to calculate the daily rate. Add 1 and raise the result to the number of days interest accrues. Subtract 1 from the result and multiply by the initial balance to calculate the interest earned.
Current liabilities are used to determine a company's ability to pay off its short-term obligations as they fall due. Current liabilities are used to evaluate the efficiency and short-term financial stability of a company. So, it is inferred that current liabilities are a measure of a company's level of liquidity.
Debt is one part of a firm’s capital structure. A firm uses various bonds, loans and other forms of debt, so cost of debt is the rate paid by the firm to use this debt as a means of finance. Multiplying the before-tax rate (by one, minus the marginal tax rate) gives the after-tax rate. This measure gives the investors an idea of the riskiness of the firm compared to others in the industry. A firm with a higher risk profile will have a higher cost of debt, so the cost of borrowing decreases as debts become safer.
A bond is a loan that an investor makes to a corporation, government, federal agency or other organization. Consequently, bonds are sometimes referred to as debt securities. Since bond issuers know you aren't going to lend your hard-earned money without compensation, the issuer of the bond (the borrower) enters into a legal agreement to pay you (the bondholder) interest. The bond issuer also agrees to repay you the original sum loaned at the bond's maturity date, though certain conditions, such as a bond being called, may cause repayment to be made earlier.
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