Understanding the correct level of corporate bonds debt – is a key component of learn trading and investing course. A bond is another name for debt, it is essentially an IOU.
Governments can borrow money, and this debt is known as Treasury Bond and large companies can borrow money and this debt is known as Corporate Bond.
As an investor we want to invest in a company which has some debt, not too much debt in case in can’t be repaid and the company goes into administration.
We want just the right amount of debt at the right level of interest which can be a very good source of finance for a company. It shows that the company is maximising its economic resources and growing in a measured and controlled fashion.
Below are two videos on debt. The first video is on Government Bonds and the second video is on corporate bonds debt. Take notes whilst watching the video and be sure to note the difference between nominal value and market value of a bond. After watching the video you should be able to explain the two main factors which cause corporate bonds debt to increase or decrease in price.
corporate bonds debt
In the next lesson we shall look at how to measure the correct amount of debt before investing i.e. Debt Ratio.