Corporate Bonds - Business Finance 101
Bond
- is defined as a long-term debt of a firm or the government set forth in writing and made under seal.
Kinds of Bond
1. Government Bonds - are those issued by the government to finance its activities.
2. Corporate Bonds
- are those issued by private corporations to finance their long -term funding requirements.
Bonds as Distinguished from Stocks
1. A bond is a debt instrument while stock is an instrument of ownership.
2. Bondholders have priority over stockholders when payments are made by the company.
3. Interest payments due to bonds are fixed, while dividends to stockholders are contingent upon earning and must be declared by the board of directors.
4. Bonds have specific maturity date, at which time, repayment of the principal is due. In contrast, stocks are instrument of permanent capital financing and does not have maturity dates.
5. Bondholders have no vote and no influence on the management of the firm, except when the provisions of the bond and the indenture agreement are not met.
Alternative way of bond Issuance
Bonds are issued through any of the following ways:
1. Public Offering
- involves selling of corporate bonds to the general public through investment bankers.
2. Private Placement
- is a sale of bonds directly to an institution and is a private agreement between the issuing company and the financial institution without public examination.
I. BONDS by Type of Security
Debentures
- are general credit bonds not secured by specific property.
Mortgage Bonds
- are those which are secured by a lien on specially named property as land, buildings, equipment, and other fixed assets.
Assumed Bond
- There are times when a corporation buys another corporation, or is merged with another.
Guaranteed Bonds
- is a type of bond in which the payment of interest, or principal, or both, is guaranteed by one or more individuals or corporations.
Joint Bonds
- There are times when a property is owned jointly by
- is defined as a long-term debt of a firm or the government set forth in writing and made under seal.
Kinds of Bond
1. Government Bonds - are those issued by the government to finance its activities.
2. Corporate Bonds
- are those issued by private corporations to finance their long -term funding requirements.
Bonds as Distinguished from Stocks
1. A bond is a debt instrument while stock is an instrument of ownership.
2. Bondholders have priority over stockholders when payments are made by the company.
3. Interest payments due to bonds are fixed, while dividends to stockholders are contingent upon earning and must be declared by the board of directors.
4. Bonds have specific maturity date, at which time, repayment of the principal is due. In contrast, stocks are instrument of permanent capital financing and does not have maturity dates.
5. Bondholders have no vote and no influence on the management of the firm, except when the provisions of the bond and the indenture agreement are not met.
Alternative way of bond Issuance
Bonds are issued through any of the following ways:
1. Public Offering
- involves selling of corporate bonds to the general public through investment bankers.
2. Private Placement
- is a sale of bonds directly to an institution and is a private agreement between the issuing company and the financial institution without public examination.
I. BONDS by Type of Security
Debentures
- are general credit bonds not secured by specific property.
Mortgage Bonds
- are those which are secured by a lien on specially named property as land, buildings, equipment, and other fixed assets.
Assumed Bond
- There are times when a corporation buys another corporation, or is merged with another.
Guaranteed Bonds
- is a type of bond in which the payment of interest, or principal, or both, is guaranteed by one or more individuals or corporations.
Joint Bonds
- There are times when a property is owned jointly by