Corporate Bonds †Business Finance Essay

Bond is defined as a long-term debt of a firm or the giving medication set forth in write and make under seal.Kinds of Bond1. Government Bonds argon those issued by the government to finance its activities.2. Corporate Bonds be those issued by private corporations to finance their long -term funding requirements.Bonds as Distinguished from Stocks1.A bond is a debt instrument man stock is an instrument of ownership. 2.Bondholders have priority over stockholders when payments atomic number 18 made by the company. 3.Interest payments due to bonds argon fixed, while dividends to stockholders ar contingent upon earning and must be declared by the board of directors. 4.Bonds have specific adulthood date, at which time, repayment of the principal is due. In contrast, stocks are instrument of abiding 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 track of bond IssuanceBonds are issued d cardinal any of the following shipway1. Public Offering involves selling of corporate bonds to the habitual public through investment bankers.2. Private Placement is a sale of bonds directly to an conception and is a private agreement between the issuing company and the fiscal institution without public examination.I. BONDS by Type of SecurityDebentures 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 multiplication when a corporation buys another corporation, or is merged with another.Guaranteed Bonds is a typecast 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 time when a property is owned jointly by several companies. II. BONDS by manner o f participation in earningsCoupon Bonds these are bonds having attachments of a series of postdated certificates payable to the bearer for the interest over the life of the bond.Registered Bonds these are bonds wherein the names of the owners are recorded on the transfer books of the company.Participating Bonds these are bonds which stipulate a fixed coupon rate but which in any case provide a method of receiving additional income over and above this tokenish sum.Bonds with Warrants Bonds may also have warrants attached to them. The warrants is an option or a right, exercisable by its holder, to purchase stock at a stated bell during a stipulated period of time.Bonds with Junior Security Attached these are bonds which are issued along with some shares of stock in a package or block sale.III. BONDS by method of retirementSerial Bonds is one among a group of bonds a part of which mature semi-annually or annually or else of all on a single date.Sinking Fund Bonds Bonds may also be gradually retired with the provision of a sinking fund.callable Bonds The are bonds with provisions that the terms of the issue can be scratch or called.Convertible Bonds These are bonds which may be exchanged for the cat valium stock of the issuing corporation at a fixed price, at a pre-determined redemption date and at the option of the bondholder.Perpetual Bonds These are bonds which cannot be redeemed by demanding repayment.THE INDENTURE AND TRUSTEEIndenture is a contract between the corporation and the trustee on behalf of the bondholders.Trustee is a person who handles monies or property on behalf of another in a trust.