This category covers all kinds of topics in finance including corporate finance and financial management. The topics on financial institution and stock exchange will also be included.
Zero-coupon bonds do not offer periodic interest payments like coupon bonds. They offer zero-interest payments periodically. The only cash inflow for the investor comes at the bond maturity through principal repayment. These bonds are issued at a deep discount to attract investors since they do not offer periodic interest payments. Definition A zero-coupon bond is […]
Mortgage Bonds are secured by a mortgage or a pool of mortgages that are backed by collateral such as real estate property. The collateral backing makes mortgage bonds secured form of investment. The collateral can include both residential and commercial real estate properties. Definition A mortgage bond is secured by a mortgage that is typically
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Junk bonds are common bonds issued with high-risk ratings by credit rating agencies. These bonds carry a higher risk of default than other bonds. A higher risk of default means a higher yield on investment; hence these bonds are also called high-yield bonds. These bonds work similarly to any other commercial bond. Bond issuers of
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Floating rate bonds or floaters come with variable interest rates. Unlike fixed interest rate bonds, these bonds offer variable returns on investments. The variable interest rates adjust periodically with the Fed Funds Rate or LIBOR. These bonds can adjust interest rates on a daily, weekly, monthly, or quarterly basis. Deeper Definition Traditionally, bonds are considered
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A collateral trust bond is secured by the issuer’s security instruments held with a trustee. These securities can include stocks, bonds, and notes to name a few. The issuer grants a lien to the investor in a collateral trust bond. Collateral trust bonds are secured financial instruments as they come with collateral. The value of
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For most companies and businesses, profitability is one of the most critical success metrics. Most stockholders in companies focus on their profit-making ability. This profit is not only crucial for distributing among shareholders but can also provide a source of finance. Companies may choose to either hold their profits or distribute them to their shareholders.
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Subordinated debt or debentures ranks lower than senior debt and higher than stocks. The term “subordinate” here refers to the priority and ranking of debt repayment in the case of the borrower’s liquidity. For issuers of debt, the senior debt gets the top priority, followed by different types of subordinated debentures, and the stocks at
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An income bond is a security instrument in which the investor only receives repayment of the face value. The coupon or interest payments are made only if the issuer generates sufficient income. It is a rarely used instrument in the corporate world. Since there are no guaranteed returns on investment, it does not attract investors.
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Debentures are often the alternative name of unsecured bonds. It can be any debt instrument without collateral. It is the form of issuing debt without pledging any assets as collateral. Large companies and government institutes issue debentures to raise funds from capital markets. What is Debenture? A debt instrument that is unsecured and comes without
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Cash concentration refers to a treasury term that involves the pooling of cash funds from different accounts into a single centralized account. The term is often used together as concentration and disbursement. The cash concentration and disbursement take place to and from a single centralized treasury account of a company. It is also an important
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