What is a company bond?
Company bond is a type of unsecured investment issued by corporations to raise money. Bonds are a common form of bonds and usually do not stay until the investor holds them for ten or more years. If the corporation declares bankruptcy, bond holders are paid for joint and preferred shareholders. The company has the opportunity to issue convertible bonds, which means that after some time investors can transfer bonds to stock shares. The secured debt, such as a car loan, has a property that can be disposed of if the debt cannot be paid. The amount of money obtained from the sale of collateral compensation as a payment to the investor. Unsecured debt brings greater risk and investors usually do not choose to invest in a bond unless a corporation does not have solid credit rating and payments history.
bonds are the most common type of business bond because they are openly traded on various international market exchanges. When the investor buys a bond, he exchanges capital for a claim against futurethe company's earnings. The bond can be sold at a price that is above or below or below its maturity. For example, a bond that sells over par will be more likely to get back than the investor at the end of his period.
The company bond, which sells above its nominal value, usually brings a higher interest rate to replace the difference in price. Because there is a higher long -term risk, the investor is compensated for more return. Bonds that are sold below their nominal value or discount usually carry a lower return rate, because the long -term risk is very slight. An example of a low -risk bond is a 30 -year -old treasury issued by a national government.
From the point of view of the company, issuing a corporate bond also brings a greater long -term risk. While the Company receives a short -term capital that needs to operate a large amount of debt issuedDescriptions can lead to future financial problems. This problem usually arises when companies are unable to achieve long -term growth and profitability of sales. Since the bond Act believes that bonds are some of the latest payment obligations to be met when bankruptcy, a large part of the outstanding debt may reduce the credit rating of the company.