Abstract This paper discusses the advantages and disadvantages of the use of the sinking fund in corporate bonds from the viewpoint of the corporation and the bondholders. This paper also discusses the advantages and disadvantages of the call provision from the viewpoint of the corporation as well as its bondholders. These elements carry heavy weight when considering expansion into an international market. The corporation's current status and ratings play a big role in what kind of financing is available and what kind of future debt will be acquired. Key members of management must keep all areas of performance in mind when formulating a strategy for entry. With this in mind, the paper also analyzes factors that effect performance such as bonds yield to maturity. The writer explores the issue of risk as a constant factor evident in business. It can be seen as both a positive and a negative. Risk affects all facets of the corporation, not only the foreign subsidiary but also company performance. It is therefore important to include a risk assessment as a part of any global strategy.
Introduction
Role of Debt Over Equity
The Sinking Fund
The Call Provision
Factors Effecting Yield to Maturity
Factors Effecting Risk
Conclusion
From the Paper "The role of debt over equity is important to consider as a company expands, as it is a true indicator of how the company will succeed. It describes how the company manages its money in its balance sheets. It refers to money the company owes and does not expect to pay off within the next year. In business, there are long term and short term debts. These debts are categorized by how lengthy a repay period there is with the creditor. A good sign that the company is succeeding is when the equity outweighs the debt or that the debt is getting smaller over time. This indicates a certain amount of health within the organizational structure. However, companies with more long-term debt than short-term debt find themselves in trouble because they must continue to pay interest payments and risk having little working capital. It is important a company pay close attention upfront when borrowing money and note the interest rate of the loans as some fall privy to market fluctuation. Long-term debt is more volatile as interest rates can be influenced by economic changes. It is important to analyze how a new international location is doing before committing to entry there. Still interest rates plays a dramatic role in how banks rate a company the ability to pay on time. In this way it benefits the banks more as they are able to "spur innovation to extract return for investors via new structures, some involving high leverage" ("The Financial Stability Conjuncture and Outlook" 51). Debt always works to benefit the banks in this way."
Tags: bonds, sinking, funds, corporate, bonds, market, international
Abstract This paper explains that traditional financial thinking relies on assumptions of certainty, complete knowledge and market efficiency and in this context, financial decisions should be relatively straightforward. In the real world though, many times what is observed deviates greatly from what would be expected using traditional financial thinking. This paper therefore uses different game theory models to more accurately explain observed financial decisions dealing with capital structure, corporate acquisitions and initial public offerings (IPOs).
From the Paper "Game theory has made great strides in explaining many of the observed phenomena falling under corporate finance. One example is the capital structure decided upon by a firm's management. Capital structure deals with the firm's decision to raise funds through debt versus equity and what ratio of debt to equity should the firm maintain. Modigliani and Miller in 1958 showed that in perfect capital markets (i.e. no frictions and symmetric information) and no taxes a firm could not change its total value by altering its debt/equity ratio; thus capital structure is irrelevant. However in the real world, capital structure is carefully thought about by every company, and it is in fact not irrelevant because taxes do exist and capital markets are not perfect."
Abstract This paper looks at bonds, a splitting of a very large loan into many easily transferable notes or units. It discusses how each bond is a long-term investment, which also bears an interest and how, after being issued, the bond is sold to the investing public with the result that there are multiple bondholders participating in one loan. Through an analysis of the different types of bonds available, it attempts to advise on the right bond for the right situation.
Outline
Abstract
Introduction
What are Bonds?
Issuance of Bonds
Liquidity of Bonds
U.S. Government Bonds
Municipal Bonds
Corporate Bonds
Zero-Coupon Bonds
Conclusion
From the Paper "Bonds have never been as attractive to investor as stocks, and in recent years bonds look plain and confusing. Who needs them? And while stocks have averaged 11% annual returns over time, bonds have dropped down to less than 6%. The happened in 1998, when bonds posted an 8.6% total return and stocks took 26.7%. It was the fourth straight year of 20%-plus gains for the S&P 500 index (Morgan Stanley). Well, don't be fooled. Stocks won't always give you such great returns. And it's often the case that when stocks go down, bonds go up, making them an excellent source for diversifying your portfolio. In the third quarter of 1998, the S&P 500 dropped by 11% due to fear of a global economic slowdown."
