SUBORDINATED DEBT Definition

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SUBORDINATED DEBT is debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt holders receive payment only after senior debt claims are paid in full. There is a pecking order determining the sequence in which a company will pay off its debt instruments, subordinate (or junior) issues will not be repaid until unsubordinated (or senior) debt has been repaid in full.

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FIXED COST is a cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense.

FINANCIAL LEVERAGE is the use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.

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