A General View on Bonds Bonds along with shares are components of the capital market which acts as a debt security. It is one of the long term debt instrument which acts as an alternative form of investment. In this regard, it can be stated that bond is a form of loan which is issued by the business for better opportunity to the public or wealthy individuals. 1 Bonds are financial instruments which are used by the companies in order to raise money for the expansion of the business. Companies tend to issue bonds to raise money rather than taking loans from the financial institutions2.
Bonds are initiated by the companies in the market as it helps in providing benefit in the long term investment need for expansion and better opportunity. Moreover, the reasons for bonds to become promising for the business are because of the benefits it provides3. It is reflected that the bond markets provides more liquidity and lower overall cost along with the flexibilities that are required by the company in order to run their business in a smooth manner. 4 As per the case, Emma and Dan are in the frame of mind to use bond to raise money for its public company i. e.
Farm Turbine plc. The reason for such initiative might be due to the accessibility of the market from the issuance of the bonds. Another reason for the decision regarding the bond is due to the fact that the Farm Turbine plc. has created a reputation in the market through its services in the past two years. Moreover, funding by the use of the bond is usually preferred by the companies because financing through bonds are relatively cheap5. Bonds are of importance in the changing economic environment of the country and global market.
During the time of recession, the bond market is intended to have liquidity which is of importance for the success of the business. There are various forms of bonds that can be issued by the company in order to get the financial support. Bonds are secured, unsecured, registered or unregistered and few are exchangeable and convertible. They are usually traded in the corporate bond market, which can also accurately indicate the prospect of economy and the situation of present capital market. 6 Bonds differ in various respects and thus the decision of bond issuance depends on various factors.
The bond issuers are basically borrowers who contain a promise to repay the amount along with the interests to the bondholders. And the owner of the bond can make a sale at a current market value without even waiting for the date of maturity.