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Question
Justify the following statement.
Bond holder is creditor of the company.
Justify
Solution
- According to Webster Dictionary, "A bond is an interest-bearing certificate issued by the government or business firm promising to pay the holder a specific sum at a specified date."
- Bonds have a specific maturity date at which the principal amount is repaid.
- A bond is a debt security. It is a contractual agreement to repay borrowed funds with interest. A bond is a loan.
- The bondholder is the institution's lender. He gets a set interest rate.
- Bond holders are not owners and are not authorized to attend the general meeting. They do not have voting rights and hence do not participate in management decisions. As a result, the bond holder is the comparison's creditor.
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Sources of Borrowed Capital - Bonds
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