Corporate Bonds

Archive for April, 2008

Question: Business Organizations?

i have some questions about economics.

Answer: 1.Why is a sole proprietorship the easiest type of business to establish?
LOWEST COST - YOU DON'T NEED TO SPEND MONEY ON INCORPORATING WHICH BASICALLY REQUIRES THAT YOUR COMPANY NAME IS UNIQUE IN THE REGION YOU ARE INCORPORATING. ALSO PAPERWORK HAS TO BE MORE ORDERLY, AND YOU HAVE TO PREPARE FINANCIAL STATEMENTS AT TEH END OF THE YEAR. BASICALLY MORE PAPREWORK AND MORE COST.

2.How does forming a partnership solve many of the problems that are associated with sole proprietorships?
YOU ARE ONLY SPREADING YOUR RISK WITH YOUR PARTNER; SOLE PROPRIETORSHIPS ARE RISKY SINCE YOUR RISK IS SPREAD INTO YOUR PERSONAL ASSETS.

3.Explain the structure and strengths of a corporation.
LIMITED RISK; ITS RESTRICTED TO THE ENTIRITY YOU CREATE/REGISTER; AS LONG AS YOU DON'T KEEP TOO MUCH FUNDS IN THE CORPORATION, EVEN IN CASE OF A LAWSUIT, YOU DON'T LOOSE MUCH.

4.Compare stocks and Corporate Bonds. How do corporations raise money through stocks and bonds?
IMAGINE BONDS AS BEING A LOAN; YOU HAVE TO PAY BACK TEH SUM AND INTEREST ON THE BOND AS PER THE TERMS WHEN TEH BOND WAS ISSUED. BOND HOLDERS HAVE LESSER RISK.

STOCKS - THE STOCKHOLDERS BEAR RISK IN THE COMPANY AND ARE ENTITLED TO DIVIDENDS WHENEVER THEY ARE ISSUED.

5.Explain why a corporation would choose to become a conglomerate.
CORPORATIONS CAN BECOME A CONGLOMORATE TO MINIMIZE RISKS FROM BUSINESS UNITS THAT ARE RISKY; THOSE UNITS CAN BE SPUN OFF AS INDIVIDUAL ENTITIES AND HELD IN A LOOSE AGGREGATION WITH THE PARENT COMPANY WITH THE COLLECTION BEING TERMED A CONGLOMORATE.

6.Explain the advantages of opening a franchise. Can you think of any disadvantages? List those too.
THE FRANCHISER HAS A PROVEN CONCEPT THAT WORKS AND YOU ARE SIMPLY USING HIS BUSINESS TEMPLATE; CUSTOMERS ARE PRETTY ASSURED (ASSUMINGTEH FRANCHER IS POPULAR).

DISADVANTAGE IS THAT YOU HAVE TO WORK WITHIN THE DOMAIN OF THE FRANCHISER; YOU CANNOT BECOME CREATIVE AND ALTER THE BRAND/PRODUCT THAT YOU ARE SELLING.

Stocks, Bonds & Investments : Types of Corporate Bonds

Question: Corperate bond, what happends to your investment if the company is bought?

Lest just say you bought some Corporate Bonds because of the high Interest rate, and the company isn’t doing so well later on... what would happen to your bonds if the company is bought out by a bigger company or what if it went into bankruptcy

Answer: Its depend on the terms and conditions attached to the bond. Bond is nothing but a loan to the company, so you are the creditor of the company. The bond deed (or Constitution, articles, Instrument... depending on which country you come from) explains what will happen when the company is acquired by another company. As the company is bought by the other company as a going concern, the new investor will honour the loan, except when otherwise stated on the bond deed. Some bond required that the company must repay the bond holder once the company is acquired by someone. So read the bond deed to find out the answer.

If the company went into bankruptcy, the outcome depends on whether the bond is secured, priority or sub-ordinate or not. If it is a secured bond, the asset backing the bond will be sold and the bond holder will get money first, before any other person. If the bond is sub-ordinate bond, then the bond holder can only get their share of money after everyone is paid.

So , read the bond deed.

Bond Investing : When Is the Best Time to Buy Municipal Bonds?