Disc 4-6
Kingston08
Disc4-6.docx4.3 Discussion: Understanding Bonds and the Debt Markets
1. Respond to two of your classmates’ postings, writing as if you were reviewing their postings in an academic journal. Your discussion responses should therefore answer the following questions as applicable:
a. Are your classmates’ arguments articulate and logical? Are their facts correct?
b. Are your classmates’ interpretations reasonable and consistent with experts in the field? Are your classmates consistent with both the substance and intent of their references?
2. Your discussion responses should not focus on whether or not you agree with your classmates, but how well they present their positions. Each response should be at least 150 words in length and cite at least one academic source. Please strive to make your discussion responses either extend the scholarly discussion in a productive direction, or offer thoughtful analysis that helps your classmates deepen their own understanding.
Peer Review 1: (Sai Chaitanya)
Bonds are offered by the company as a way of raising funds by borrowing money from the investors with a promise to pay back the principal amount at the time of maturity of the bond and a payment of interest in the form of coupon payment at regular intervals which is based on a specified rate of interest. They add up to the long-term debt of the company. Stocks are offered by the company to raise funds by giving a share of the company to the investors in the form of stock giving them a right of ownership in the company and they are paid their share of the company’s profits in the form of dividends. They are a choice when the company wants capital and wants to avoid any debts.
Moody’s Investors services is one of those many bond rating agencies who task is to provide rating for various types of bonds determining the financial strength of the company, the risk involved (if any), the return on the bond the investor can expect. These agencies provide rating symbols which carry information which can be understood by the investors easily for efficient decision making. The unethical actions of Moody have made the investors lose their trust in these agencies not only causing them loss but also to the other agencies in the field of bond rating suffered the consequences. (When To Trust Bond Rating Agencies, 2020). According to me the verse from the bible that suits the situation is Mark 8:36 “For what does it profit a man to gain the whole world and forfeit his soul?”
Reference: When To Trust Bond Rating Agencies. (2020, January 22). Investopedia. https://www.investopedia.com/articles/bonds/09/bond-rating-agencies.asp
https://www.openbible.info/topics/business_ethics
Peer Review 2: (Anjana Reddy)
Bonds are the long term debt instruments of a company. Bonds are another option of raising funds for the company in place of issuing equity. On the other hand, Equity is issuing a part of the firm in exchange of money. Bonds are used to finance capital projects where safety, consistency and comparatively smaller amount are needed. Bonds are a type of loan where the bond has a par value and coupon rate which is paid to the bond holder by the company. For instance, if a bond is issued at a $1000 face value holding a coupon rate of 5% then the bond holder will be paid $50 each term until the maturity date and once the maturity date is reached the bond holder will be paid back the principal amount of $1000.
Stocks are the long term liabilities of a company. Stocks are the generally preferred option of raising funds of a company. Equity is when the company gives one part of the company to a stockholder in exchange of a monetary value. Stocks are the combined number of shares of a company. Each share has a face value and is issued at the same value, an increased value or at a discount depending on company’s discretion. And each of these shares represents the stake of ownership in the company to that similar value. The stocks are paid dividend when company earns profit as the stockholders are owners of the company and have a share in their profits too. Stocks are a long term investment and are generally preferred by companies for financing their capital projects as huge amounts can be taken with no immediate need to pay back. (Differences Between Stocks and Bonds, 2021)
A Bond rating basically is the representation of the worthiness of any company which is issued by credit rating agencies. Investors rely on these agencies to make any investment decisions. Rating agencies have a key role in both the primary and secondary markets. After the scandal people lost their faith in these agencies and it was unethical of them to do so because the investors believed in them and invested money. According to me the suitable bible verse would be (John 8:31) “If you abide in my word you will know the truth & the truth will set you free.”
References: Differences Between Stocks and Bonds. (2021, May 5). The Balance. https://www.thebalance.com/the-difference-between-stocks-and-bonds-417069
5.3 Discussion: Cash Flows and Stock Valuation
1. Navigate to the Discussion page and respond to the following prompts:
a. Stock Valuation: How does the value of a share of stock depend on dividends?
b. Dividend Policy: A substantial percentage of the companies listed on the NYSE and NASDAQ don’t pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible, given your previous answer?
2. Your discussion should be based on the chapter (with special consideration to the concept of Cash Flows) as well as other resources that can contribute to the discussion.
3. Your initial post should be 150 to 300 words in length and include at least one academic source that is properly cited. Your initial post is due by the end of the fourth day of the workshop.
6.3 Discussion: Capital Budgeting
1. Navigate to the Discussion page and respond to the following prompts:
a. Application: How could capital budgeting be applied in your organization or to your personal finances?
b. Not-for Profit Entities: Are the capital budgeting criteria discussed in the chapter applicable to not-for-profit corporations or the government? How so?
2. Your discussion should be based on the chapter reading, as well as other resources that can contribute to the discussion.
3. Your initial post should be 150 to 300 words in length and include at least one academic source that is properly cited. Your initial post is due by the end of the fourth day of the workshop.
