Author Question: What is a bond, and why do companies issue bonds? What will be an ideal ... (Read 99 times)

Mollykgkg · **on:** Jul 5, 2018

What is a bond, and why do companies issue bonds?

What will be an ideal response?

Question 2

The ratio of cash to monthly cash expenses includes both cash and cash equivalents in the numerator.
a. True
b. False

Indicate whether the statement is true or false

triiciiaa · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

A bond is a special type of long-term debt. It is a written agreement that specifies the issuing company's responsibility to pay interest for the use of the borrowed money and to repay the bond principal at the end of the term of the bond (at maturity).

Companies issue, or sell, bonds to creditors and investors in order to raise a large amount of money. Companies prefer to issue bonds rather than go to an individual lender for three reasons. First, companies can usually borrow more money with bonds than with other types of long-term notes. Second, bondholders are typically willing to invest in bonds with long maturities, such as 20 or 30 years. Third, the interest rate on a bond is usually lower than the rate offered by banks.

Answer to Question 2

True