Liabilities

[Audio] So far we have sttied chapter 7 and chapter 9, Chapter 7 covers current assets, and Chapter 9 focuses on long-term assets. Today, we will discuss Chapter 10, which covers liabilities, specifically long-term liabilities such as bonds payable..

[Audio] A bond payable is a long-term debt issued by a company or government to borrow money from investors. The purpose of issuance bond is finance a particularly large project, such as developing an oil field . When a corporation needs to raise particularly large amounts of long-term capital, it can do so in two ways: . it can generally sells additional shares of capital stock or issues bonds payable. Think of it as a formal IOU. Instead of taking a loan from a bank, the company or government raises money by selling bonds to investors. These investors, in turn, become lenders, and the issuer (company or government) makes two promises: Regular Interest Payments: Every six months or so, the issuer pays interest to the bondholders as a "thank you" for letting them Repayment of Principal: At the end of the bond's term (often 10, 15, or even 30 years), the issuer repays the original amount borrowed (the bond's face value or principal)..

[Audio] Bonds are typically issued in $1,000 units, are transferable, and are often described as "fixed income" investments due to their steady interest payment.Companies typically issue bonds when they need to raise significant amounts of capital—more than what they might obtain from traditional loans. These investors, in turn, become lenders, and the issuer (company or government) makes two promises: Regular Interest Payments: Every six months or so, the issuer pays interest to the bondholders as a "thank you" for letting them Repayment of Principal: At the end of the bond's term (often 10, 15, or even 30 years), the issuer repays the original amount borrowed (the bond's face value or principal)..

[Audio] The prevailing rate of return demanded by investors in the market for bonds of similar risk and maturity..

[Audio] When bonds are issued, the corporation usually utilizes the services of an investment banking firm, called an underwriter. The use of an underwriter assures the corporation that the entire bond issue will be sold without delay and that the entire amount of the proceeds will be available at a specific date. Goldman Sachs; J.P. Morgan; Morgan Stanley; Bank of America; Merrill Lynch; Citigroup; Barclays; Deutsche Bank; Credit Suisse; UBS; Lazard New York Stock Exchange (NYSE); Nasdaq Stock Market; London Stock Exchange (LSE); Tokyo Stock Exchange (TSE).